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Advice

Subject: non-concessional contributions cap

Is the amount of contributions transferred to your superannuation fund under the splitting arrangements included in your non-concessional contributions cap for the 2011-12 financial year ?

Advice/Answer

No.

This advice applies for the following period

Year ending 30 June 2012.

The scheme commenced on

1 July 2011.

Relevant facts

You are age under 65 and not retired.

Your spouse is age under 55.

In July 2011, your spouse split her 2010-11 splittable contributions from her superannuation fund to your superannuation fund for your benefit.

Both superannuation funds are accumulation funds and are complying superannuation plans.

Relevant legislative provisions

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

Paragraph 292-90(2)(a) of the Income Tax Assessment Act 1997

Paragraph 292-90(2)(b) of the Income Tax Assessment Act 1997

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

Section 295-155 of the Income Tax Assessment Act 1997

Section 306-10 of the Income Tax Assessment Act 1997

Section 307-5 of the Income Tax Assessment Act 1997

Subsection 307-65 of the Income Tax Assessment Act 1997

Subsection 995-1(1) of the Income Tax Assessment Act 1997

Division 6.7 of the Superannuation Industry (Supervision) Regulations 1994

Regulation 6.40

Subregulation 6.44(1)

Subregulation 6.45(2)

Reasons for decision

Summary

The contributions transferred to your superannuation fund account under the splitting arrangements in the 2011-12 financial year are not included in your non-concessional contributions cap in the 2011-12 financial year.

Detailed reasoning

Splitting contributions between spouses

Division 6.7 of the Superannuation Industry (Supervision) Regulations 1994 (SISR) provides the mechanism for members to request a split of their contributions to their spouse.

Under subregulation 6.44(1) of SISR, a member of a regulated fund may, in a financial year, apply to their fund trustee to roll over, transfer or allot an amount of their splittable contributions for the benefit of their spouse. A payment made in accordance with the trustee's acceptance of an application in accordance with subregulation 6.45(2) is defined in regulation 6.40 as a 'contributions-splitting superannuation benefit' .

Regulation 6.46 stipulates that if a trustee accepts an application made under subregulation 6.44(1), the applicant's spouse is the receiving spouse.

Under the splitting arrangements, the applicant's contributions that are split and paid to another fund for their spouse is treated as a roll-over superannuation benefit for the receiving spouse and is not subject to tax in the hands of the receiving fund.

Non-concessional contributions for a financial year

Non-concessional contributions for a financial year are defined in section 292-90 of the Income Tax Assessment Act 1997 (ITAA 1997). In determining whether an amount will count towards a person's non-concessional contributions cap for a financial year, we must consider if an amount is a contribution covered under subsection 292-90(2).

Subsection 292-90(2) stipulates that a contribution is a non-concessional contribution for a financial year if:

§ it is made in the financial year to a complying superannuation plan in respect of an individual and

§ it is not included in the assessable income of the superannuation provider in relation to the superannuation plan, or

§ it is not included, by way of a roll-over superannuation benefit, in the assessable income of any complying superannuation fund or RSA provider in the circumstances mentioned in subsection 290-170(5)(about successor funds);

and

§ it is not any of the contributions listed in paragraph 292-90(2)(c).

Subparagraph 292-90(c)(vi) specifically excludes a roll-over superannuation benefit from being a non-concessional contribution.

A roll-over superannuation benefit is defined in subsection 995-1(1) as having the meaning given by section 306-10.

Under section 306-10, a superannuation benefit is a roll-over superannuation benefit if :

§ it is a superannuation lump sum and a superannuation member benefit;

§ the benefit is not a superannuation benefit of a kind specified in the regulations (such as a benefit arising from the commutation of a superannuation income stream paid to a person because of the death of another person); and

§ the benefit is paid from a complying superannuation plan; and

§ the benefit is paid to a complying superannuation plan.

A superannuation lump sum is defined in subsection 995-1(1) as having the meaning given by section 307-65 which defines the term as being a superannuation benefit that is not a superannuation income stream benefit.

A superannuation member benefit is defined in subsection 995-1(1) as having the meaning given by section 307-5 and includes a superannuation fund payment as a superannuation member benefit.

Under the splitting arrangements in Division 6.7 of SISR, regulation 6.40 defines the terms 'superannuation lump sum' and 'superannuation benefit ' to have the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997).

The amount that is paid by way of roll-over in accordance with an application made to split contributions under subregulation 6.44(1) of SISR to the superannuation fund account for a receiving spouse therefore meets the definition of a roll-over superannuation benefit in

section 306-10 of the ITAA 1997.

Assessable income of the superannuation provider

Subdivision 295-C of the ITAA 1997 details the contributions included as assessable contributions for the purposes of taxation of a superannuation entity. Specifically, section 295-155 of the ITAA 1997 determines that there are basically 3 types of assessable contributions:

(a) those made by a contributor (for example, an employer) on behalf of someone else (for example, an employee); and

(b) those made on the contributor's own behalf for which the contributor is entitled to a deduction; and

(c) those transferred from a foreign superannuation fund to an Australian superannuation fund.

Under the splitting arrangements in Division 6.7 of SISR, a contribution transferred or rolled over to a fund for the benefit of a receiving spouse is treated as a roll-over superannuation benefit and therefore not included as assessable contributions of the receiving's spouse's superannuation fund.

It is also not a contribution covered under subsection 292-90(2) as it is a roll-over superannuation benefit (subparagraph 292-90(2)(c)(vi)). Consequently, the split amount is not counted towards the receiving spouse's non-concessional contributions cap for the financial year.

From the information provided, you stated your spouse has split an amount of her splittable contributions during the 2011-12 financial year to your superannuation fund.

Subject to the split amount meeting all the requirements under Division 6.7 of SISR and is a payment made in accordance with the trustee's acceptance of the application under subregulation 6.45(2), it is a 'contributions-splitting superannuation benefit' and treated as an amount rolled-over to your fund for your benefit.

As the amount meets the definition of a roll-over superannuation benefit in section 306-10 and it is not assessable income in the hands of your fund, therefore it is not a contribution that is covered under subsection 292- 90(2) as a non-concessional contribution. Consequently it is not a contribution that is counted towards your non- concessional contributions cap for the 2011-12 financial year.