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Authorisation Number: 1011742172626

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Ruling

Subject: Concessional contributions and non-concessional contributions caps

Question

Will the roll-over payment count towards either your concessional contributions cap, or your non-concessional contributions cap, for the 2010-11 financial year?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 2011

The scheme commences on:

1 July 2010.

Relevant facts and circumstances

You are over age 70 but under age 75, and until late 2010 you had a superannuation account in the transferring fund. The transferring fund is a complying superannuation fund.

In an advice letter issued by the transferring fund several days later, you were advised that a cheque for a residual amount in your superannuation account had been forwarded to the recipient fund in accordance with your account closure instructions. The recipient fund is also a complying superannuation fund.

A Withdrawal Statement issued by the trustee of the transferring fund discloses the lump sum benefit available to be withdrawn from your superannuation account when the benefit was rolled over. A Rollover Benefits Statement for this benefit was also issued by the fund trustee several days later. The Rollover Benefits Statement shows that the roll-over payment does not contain an untaxed element of the taxable component, and is comprised of a tax-free component and a taxed element of a taxable component.

In an advice letter issued by the recipient fund several weeks later, you were advised that the roll-over payment was received from the transferring fund during the previous month. The receipt of the roll-over payment was also confirmed in a Confirmation Statement issued by this fund.

You intend to make personal superannuation contributions in the 2010-11 financial year, once you have met the work test for gainful employment. You intend to make these contributions up to the concessional contributions cap of $50,000 and the non-concessional contributions cap of $150,000 during this financial year.

You are concerned that the roll-over amount may be included in your concessional contributions and be counted towards your concessional contributions cap for the 2010-11 financial year. In addition, you are concerned that the roll-over amount may also be included in your non-concessional contributions and be counted towards your non-concessional contributions cap for this financial year.

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 Section 292-25,

Income Tax Assessment Act 1997 Subsection 292-25(2),

Income Tax Assessment Act 1997 Paragraph 292-25(2)(c),

Income Tax Assessment Act 1997 Subparagraph 292-25(2)(c)(ii),

Income Tax Assessment Act 1997 Section 292-80,

Income Tax Assessment Act 1997 Subsection 292-85(2),

Income Tax Assessment Act 1997 Subsection 292-85(3),

Income Tax Assessment Act 1997 Section 292-90,

Income Tax Assessment Act 1997 Subsection 292-90(2),

Income Tax Assessment Act 1997 Paragraph 292-90(2)(c),

Income Tax Assessment Act 1997 Subparagraph 292-90(2)(c)(vi),

Income Tax Assessment Act 1997 Subsection 295-190(1),

Income Tax Assessment Act 1997 Section 306-10, and

Income Tax (Transitional Provisions) Act 1997 Subsection 292-20(2).

Reasons for decision

Summary

The roll-over payment is a roll-over superannuation benefit which does not contain an untaxed element of the taxable component. Therefore the benefit is not a concessional contribution in the 2010-11 financial year. Thus the benefit will not count towards your concessional contributions cap of $50,000 for this financial year.

In addition, the benefit is not a non-concessional contribution. Hence it will not count towards your non-concessional contributions cap of $150,000 for this financial year.

Consequently, the benefit will not be counted towards either your concessional contributions cap or your non-concessional contributions cap, in this financial year.

Detailed reasoning

Concessional contributions

From 1 July 2007, concessional contributions made to complying superannuation funds are subject to an annual cap. The concessional contributions cap is indexed to upward movements of average weekly ordinary time earnings in $5,000 increments (subsection 292-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997)).

For the 2007-08 and 2008-09 financial years, the annual cap was $50,000. However, from 1 July 2009, the concessional contributions cap was reduced. For the 2009-10 and 2010-11 financial years, the new concessional contributions cap is $25,000. This cap applies for people who are under age 50 on 30 June 2010 and 30 June 2011.

Between 1 July 2007 and 30 June 2012, a transitional concessional contributions cap will apply.

The annual cap is $50,000 in the 2010-11 financial year for people aged 50 or over on 30 June 2011 (subsection 292-20(2) of the Income Tax (Transitional Provisions) Act 1997).

This cap is not indexed. Because you are over age 50 in this financial year, the transitional concessional contributions cap of $50,000 will apply.

If a person has more than one fund, all concessional contributions made to all their funds are added together and count towards the concessional contributions cap.

A person will be taxed on concessional contributions over the $50,000 cap at a rate of 31.5%. The superannuation fund can be asked to release money to pay this excess contributions tax. In addition, amounts in excess of the concessional contributions cap are also counted towards the non-concessional contributions cap.

Concessional contributions for a financial year

A person's concessional contributions for a financial year are determined under section 292-25 of the ITAA 1997.

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 in relation to the plan. Concessional contributions include employer contributions, salary sacrifice contributions and personal contributions claimed as a tax deduction by a self-employed person.

Concessional contributions also include the untaxed element of the taxable component of a roll-over superannuation benefit that is not an excess untaxed roll-over amount. This untaxed element of a roll-over superannuation benefit is included in the assessable income of a complying superannuation fund in accordance with item 2 of the table in subsection 295-190(1) of the ITAA 1997.

Contributions that are not assessable income of the recipient fund are not concessional contributions. Paragraph 292-25(2)(c) of the ITAA 1997 sets out amounts that are not included as concessional contributions. In particular, subparagraph 292-25(2)(c)(ii) of the ITAA 1997 excludes a roll-over superannuation benefit which does not contain a taxable component-untaxed element from being a concessional contribution. This is because no part of the benefit is assessable income of the recipient fund under item 2 of the table in subsection 295-190(1).

Therefore, where a roll-over superannuation benefit does not contain an untaxed element of the taxable component, no part of the benefit is a concessional contribution. Accordingly, the benefit is specifically excluded from being counted towards a person's concessional contributions cap for the relevant financial year.

Roll-over superannuation benefit

A roll-over amount is a roll-over superannuation benefit where the requirements of section 306-10 of the ITAA 1997 are satisfied.

The roll-over amount is a lump sum superannuation member benefit which was paid from a complying superannuation plan (the transferring fund) to another complying superannuation plan (the recipient fund).

Therefore, this roll-over payment is a roll-over superannuation benefit within the meaning of section 306-10 of the ITAA 1997.

The roll-over payment is not a concessional contribution

As noted in the facts, a Rollover Benefits Statement by the transferring fund. The Rollover Benefits Statement shows that the roll-over superannuation benefit does not contain a taxable component-untaxed element. Rather the Rollover Benefits Statement discloses that the roll-over payment is comprised of a tax-free component and a taxable component-taxed element.

In this instance, the roll-over superannuation benefit does not contain an untaxed element of the taxable component. Thus no part of the benefit is included in the assessable income of the recipient fund. Therefore under subparagraph 292-25(2)(c)(ii) of the ITAA 1997, the benefit is excluded from being a concessional contribution. This means no part of the benefit is a concessional contribution in the 2010-11 financial year. Hence the benefit will not count towards your concessional contributions cap of $50,000 for this financial year.

Non-concessional contributions

From 1 July 2007, non-concessional contributions made to complying superannuation funds are subject to an annual cap (subsection 292-85(2) of the ITAA 1997). For the 2010-11 financial year, the non-concessional contributions cap is $150,000. Non-concessional contributions include:

· personal contributions for which an income tax deduction is not claimed;

· contributions a person's spouse makes to their superannuation fund account;

· transfers from foreign superannuation funds (excluding amounts included in the fund's assessable income); and

· excess concessional contributions (if any) for the financial year.

Contributions in excess of the non-concessional contributions cap will be taxed at the rate of 46.5% unless the bring-forward provisions apply. The member will be required to ask their superannuation fund to release an amount that is equal to the tax liability.

However, it is noted that you will be over age 65 for all of the 2010-11 financial year.

Therefore in this case, the bring-forward provisions will not apply to you because a bring-forward must commence during a financial year when you are under age 65.

Exclusions from the non-concessional contributions cap

The amount of a person's non-concessional contributions for a financial year is determined under section 292-90 of the ITAA 1997. Under subsection 292-90(2) of the ITAA 1997, certain contributions are excluded from being non-concessional contributions for a financial year.

In particular, subparagraph 292-90(2)(c)(iv) of the ITAA 1997 excludes a contribution that is a roll-over superannuation benefit.

The roll-over payment is not a non-concessional contribution

As discussed above, the roll-over payment is a roll-over superannuation benefit within the meaning of section 306-10 of the ITAA 1997. Therefore under subparagraph 292-90(2)(c)(iv) of the ITAA 1997, the benefit is excluded from being a non-concessional contribution. Accordingly the benefit is not a non-concessional contribution in the 2010-11 financial year. As a result the benefit will not count towards your non-concessional contributions cap of $150,000 for this financial year.

The roll-over payment is not counted towards either of your contributions caps

In conclusion, the roll-over payment is not a concessional contribution, and is not a non-concessional contribution, in the 2010-11 financial year. Consequently, this amount is specifically excluded from being counted towards either your concessional contributions cap or your non-concessional contributions cap, in this financial year.