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Edited version of your private ruling
Authorisation Number: 1012466436199
Ruling
Subject: Crystallised segment
Questions:
In calculating the crystallised segment of your roll-over superannuation benefit is the relevant period from the date you commenced membership until 30 June 2007?
Advice/Answers:
Yes.
This ruling applies for the following period:
1 July 2013 to 30 June 2014
The scheme commenced on:
1 July 2013
Relevant facts:
You are over 55 years of age.
You are planning your retirement and therefore are seeking clarification regarding the pre-July 83 component to be included in the crystallised segment of your superannuation benefit.
No roll-over has occurred as yet.
Relevant legislative provisions:
Taxation Administration Act 1953 Section 288-105 of Schedule 1
Income Tax Assessment Act 1936 Subsection 27A(1).
Income Tax Assessment Act 1997 Section 307-225
Income Tax Assessment Act 1997 Subsection 307-225(1).
Income Tax Assessment Act 1997 Subsection 307-225(2).
Income Tax Assessment Act 1997 Subsection 307-225(3).
Income Tax Assessment Act 1997 Subsection 307-225(4).
Reasons for decision
Summary
The crystallised segment of your roll-over superannuation benefit is equal to the value of your pre-July 83 component in the superannuation fund just before 1 July 2007.
The post 30 June 1983 days of your crystallised segment are counted only up until 30 June 2007.
Detailed reasoning
The crystallised segment of a superannuation interest is defined in section 307-225 of the ITAA 1997 as follows:
307-225(1) To work out the crystallised segment of a superannuation interest, first assume that:
(a) an eligible termination payment had been made in respect of the holder of the interest just before 1 July 2007; and
(b) the amount of the eligible termination payment had been equal to the value of the interest at that time.
307-225(2) The crystallised segment of the superannuation interest is so much of the value of the interest as consists of the total of the following components of the eligible termination payment:
(a) the concessional component;
(b) the post-June 1994 invalidity component;
(c) the undeducted contributions;
(d) the CGT exempt component;
(e) the pre-July 83 component.
307-225(3) For the purposes of paragraph (2)(e), disregard the value of the interest just before 1 July 2007 to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment.
307-225(4) In this section, the following terms have the same meaning as in subsection 27A(1) of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007):
(a) concessional component;
(b) post-June 1994 invalidity component;
(c) undeducted contributions;
(d) CGT exempt component;
(e) pre-July 83 component;
(f) eligible termination payment.
From this section, it can be seen that a superannuation fund is to assume that an eligible termination payment (ETP) had been made in respect of a person just before 1 July 2007 and the amount of the ETP had been equal to the value of the person's interest in the fund at that time.
An ETP paid by a superannuation fund will be an ETP under paragraph (b) of the definition of an ETP in subsection 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936) which states:
any payment made from a superannuation fund in respect of the taxpayer by reason that the taxpayer is or was a member of the fund...
In regards to the crystallised segment and the pre-July 83 component the explanatory memorandum to the Tax Laws Amendment (Simplified Superannuation) Act 2007 states at paragraphs 2.139 to 2.142:
Crystallising the pre-July 1983 component
2.139 Five per cent of the pre-July 1983 component is currently included in a person's assessable income and taxed at marginal rates. The 'pre-July 1983 amount' forms part of the new tax free component, and is therefore tax free for lump sums paid after 1 July 2007 (including commutations of superannuation income streams).
2.140 The mechanism for including the pre-July 1983 amount in the tax free component varies depending on the status of the superannuation interest.
2.141 For most superannuation interests, a pre-July 1983 amount will be calculated as at 30 June 2007 using the existing legislative formula. This amount will become a fixed amount and form part of the tax free component. [Schedule 1, item 1, section 307-225]
2.142 Superannuation providers will have until 30 June 2008 to calculate the crystallised pre-July 1983 segment. …
Therefore, for most superannuation interests, the pre-July 83 component will be calculated as at 30 June 2007. Further, superannuation providers had until 30 June 2008 to calculate the crystallised component under section 288-105 of Schedule 1 of the Taxation Administration Act 1953.
Because, the pre-July 83 component of a person's interest in a superannuation fund is included in the crystallised segment, the post 30 June 1983 days are counted only up until 30 June 2007.
The amount calculated then becomes a fixed amount and forms part of the tax free component. It is the superannuation fund that calculates the crystallised segment.
When a member's benefits are rolled over to another superannuation fund, the tax free component of the roll-over becomes part of the contributions segment of the superannuation interest in the new superannuation fund. The crystallised component is calculated until 30 June 2007 and not until the actual roll-over date.