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Edited version of private ruling
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Ruling
Subject: Salary sacrifice and concessional contributions cap
Question
Will salary sacrifice contributions made to constitutionally protected superannuation funds in a particular income year count towards your concessional contributions cap for that income year?
Advice/Answers
No
This ruling applies for the following period
Year ending 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You are over 50 years of age.
You are an employee of an Australian state government.
You are currently making concessional superannuation contributions into two funds (the Funds).
The Funds are constitutionally protected funds.
You wish to maximise your concessional contributions up to the transitional limit of $50,000.
All contributions made to the Funds have been concessional contributions.
No other concessional contributions have been made by you or on your behalf to superannuation funds other than the Funds.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 292-15
Income Tax Assessment Act 1997 Subsection 292-20(2)
Income Tax Assessment Act 1997 Paragraph 292-25(2)(c)
Income Tax Assessment Act 1997 Section 292-150
Income Tax Assessment Act 1997 Section 290-160
Income Tax (Transitional Provisions) Act 1997 Subsection 292-20(2)
Superannuation (Excess Concessional Contributions Tax) Act 2006 Section 4
Superannuation (Excess Concessional Contributions Tax) Act 2006 Section 5
Reasons for decision
Summary of decision
In this case, you have made salary sacrifice contributions to constitutionally protected funds. As contributions made to constitutionally protected funds are excluded from being concessional contributions the amounts you have contributed are not included in your concessional contributions cap.
Reasons for decision
Concessional contributions are contributions made in respect of a person in the financial year to a complying superannuation plan and included in the assessable income of the superannuation provider. Concessional contributions include employer contributions, salary sacrifice contributions and personal contributions claimed as a tax deduction by a self-employed person.
From 1 July 2007, concessional contributions made to superannuation funds are subject to an annual cap. The concessional contributions cap will be indexed to upward movements of average weekly ordinary time earnings (AWOTE) in $5,000 increments (subsection 292-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997)). For the 2010-11 income year the annual cap is $25,000.
A person will be taxed on concessional contributions over the $25,000 cap at a rate of 31.5% (section 292-15 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Concessional Contributions Tax) Act 2006).
Between 1 July 2007 and 30 June 2012, a transitional concessional contributions cap will apply. In the 2010-11 income year, the annual cap will be $50,000 for people aged 50 or over. If a person has more than one fund, all concessional contributions made to all their funds are added together and count towards the cap (subsection 292-20(2) of the Income Tax (Transitional Provisions) Act 1997).
Amounts in excess of the concessional contributions cap are also counted towards the non-concessional contributions cap.
Under paragraph 292-25(2)(c) of the ITAA 1997 the following amounts are excluded from being concessional contributions:
· so much of an amount that is transferred to a superannuation fund from a foreign superannuation fund and is included in the assessable income of the fund as a result of a choice made under section 305-80;
· an amount that is a roll-over superannuation benefit to the extent that it contains an untaxed element that is not an excess untaxed roll-over amount;
· a contribution made to a constitutionally protected fund (CPF).
In this case, you have made salary sacrifice contributions to constitutionally protected funds. Therefore, the amounts you have contributed to them are excluded from being concessional contributions and are not included in your concessional contributions cap.