Edited version of administratively binding advice

Authorisation Number: 1012044630926

This edited version of your advice will be published in the public Register of private binding rulings after 28 days from the issue date of the advice. The attached ATO advice fact sheet has more information

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Advice

Subject: Salary sacrifice and concessional contributions

Question:

If you become a permanent resident of Australia in the future will the concessional contributions you make to an Australian complying superannuation fund be subject to extra tax on withdrawal?

Advice/Answers:

No.

This ruling applies for the following period:

1 July 2011 to 30 June 2012

The scheme commenced on:

1 July 2011

Relevant facts:

1. You are currently an Australian resident for income tax purposes and you were born after 30 June 1964.

2. You are under temporary resident but intend to become a permanent resident of Australia.

3. You are eligible to salary sacrifice into superannuation and intend to contribute to an Australian superannuation fund.

Assumptions:

You become a permanent resident of Australia.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 301-10.

Income Tax Assessment Act 1997 Section 301-95.

Income Tax Assessment Act 1997 Section 301-100.

Income Tax Assessment Act 1997 Section 301-170.

Income Tax Assessment Act 1997 Section 301-175.

Superannuation (Departing Australia Superannuation Payments Tax) Act 2007.

Reasons for decision

Question 1

Summary

As your preservation age is 60, any benefits a resident receives from a superannuation fund at age 60 or more which have a 'tax free' component and/or an 'element taxed' in the fund are not assessable and not exempt income i.e. they are free from taxation.

If a resident receives a lump sum from a superannuation fund after age 60, the 'element untaxed' in the fund is assessable income but the person will be entitled to a tax offset which ensures that the tax on that amount does not exceed 15%.

Similarly, if a resident receives an income stream from a superannuation fund after age 60, the 'element untaxed' in the fund is assessable income but the person will be entitled to a tax offset which ensures that the tax on that amount does not exceed 10%.

Detailed reasoning

Concessional contributions include employer contributions, salary sacrifice contributions and personal contributions claimed as a tax deduction by a self-employed person (subsection 292-25(2) of ITAA 1997.

Salary sacrifice contributions made to a complying superannuation fund are concessional contributions. Superannuation benefits are divided into the following three categories:

· Preserved

· Restricted non-preserved; and

· Unrestricted non-preserved.

Contributions made for or by a superannuation fund member are preserved benefits. Preserved benefits cannot be withdrawn from a superannuation fund unless one of the conditions of release is satisfied. These conditions include retirement on or after reaching preservation age. Preservation age depends on a person's date of birth as shown in the table below.

Preservation age

Taxation treatment of superannuation lump sums and income streams

For permanent residents of Australia the taxation treatment of a superannuation benefits paid from a complying superannuation fund is based on:

o the age of the benefit recipient;

o whether the benefit is a lump sum or an income stream;

o whether the benefit comprises a tax free component and/or a taxable component; and

o whether the taxable component of the benefit includes

o an element taxed in the fund; and/or

o an element untaxed in the fund.

As your preservation age is 60, any benefits you receive from a superannuation fund at age 60 or more which have a 'tax free' component and/or an 'element taxed' in the fund are not assessable and not exempt income. This is in accordance with section 301-10 of the ITAA 1997.

If you receive a lump sum from a superannuation fund after age 60, the 'element untaxed' in the fund is assessable income. You will be entitled to a tax offset which ensures that the tax on that amount does not exceed 15%. This is in accordance with section 301-95 of the ITAA 1997.

If you receive an income stream from a superannuation fund after age 60, the 'element untaxed' in the fund is assessable income. You will be entitled to a tax offset which ensures that the tax on that amount does not exceed 10%. This is in accordance with section 301-100 of the ITAA 1997.

However, if you do not become a permanent resident of Australia and are eligible for a departing Australia super payment (DASP), the tax rates for these payments are:

· 0% for the tax-free component

· 35% for a taxed element of a taxable component

· 45% for an untaxed element of a taxable component.

The above rates apply to all superannuation payments made to former temporary residents (except for holders of 405 and 410 subclass visas), irrespective of their age or whether they have retired from the workforce.

The tax is imposed in accordance with the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 and the amount of the tax is set out in that Act.