Edited version of your private ruling

Authorisation Number: 1012609940943

Ruling

Subject: Concessional contributions cap

Question

Is the amount rolled over from the DB Fund to your personal superannuation fund counted towards your concessional contributions cap in accordance with section 291-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period

Income year ending 30 June 2014

The scheme commences on

During the income year ending 30 June 2014

Relevant facts and circumstances

You are more than 59 years old.

You are an employee and a member of an unfunded defined benefit fund (DB Fund). The DB Fund was established under two Commonwealth Acts.

You are currently receiving superannuation income stream benefits from the DB Fund.

Your employer has continued to finance superannuation benefits on your behalf.

Each time you complete a service period with the employer, your accrued superannuation benefits are rolled over from the DB Fund to your personal superannuation fund.

Your personal superannuation fund is a complying superannuation fund.

During the 2013-14 financial year, an amount was rolled over from the DB Fund to your personal superannuation fund. The roll- over amount consists entirely of an 'element untaxed in the fund'.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 291-20

Income Tax Assessment Act 1997 Subsection 291-20(1)

Income Tax Assessment Act 1997 Subsection 291-20(2)

Income Tax Assessment Act 1997 Section 291-25

Income Tax Assessment Act 1997 Subsection 291-25(2)

Income Tax Assessment Act 1997 Paragraph 291-25(2)(b)

Income Tax Assessment Act 1997 Paragraph 291-25(2)(c)

Income Tax Assessment Act 1997 Section 291-165

Income Tax Assessment Act 1997 Section 306-10

Income Tax (Transitional Provisions) Act 1997 Section 291-20.

Income Tax Assessment Regulations 1997 Schedule 4

Reasons for decision

Summary

The amount rolled over from the DB Fund to your personal superannuation fund is not a concessional contribution for the purposes of section 291-25 of the ITAA 1997. Therefore, it is not counted towards the concessional contributions cap for the purposes of section 291-20 of the ITAA 1997.

Detailed reasoning

Concessional contributions cap

Excess concessional contributions for a financial year are defined in subsection 291-20(1) of the ITAA 1997 as an amount of a person's concessional contributions for a year that exceed the person's concessional contributions cap for the year.

Concessional contributions cap is defined in subsection 291-20(2) of the ITAA 1997. For the 2013-14 financial year, the cap is set at $25,000. For 2014-15 or a later financial year, the cap amount is indexed annually.

However, there are transitional rules for older Australians as outlined in section 291-20 of the Income Tax (Transitional Provisions) Act 1997 (ITTPA 1997). Subsection 291-20(1) of ITTPA 1997 states:

Despite section 291-20 of the Income Tax Assessment Act 1997, your concessional contributions cap is $35,000:

(a) for the 2013-14 financial year - if you are 59 years or over on 30 June 2013; or

(b) for the 2014-15 financial year or a later financial year - if you are 49 years or over on the last day of the previous financial year.

Note:

This amount is not indexed

On 30 June 2013, you were more than 58 years old. Therefore, concessional contribution cap of $35,000 applies to you in the 2013-14 financial year.

Concessional contributions

Concessional contributions are defined in section 291-25 of the ITAA 1997. Relevantly, subsection 295-25(2) of the ITAA 1997 provides that a contribution will be a person's concessional contribution in a financial year if:

a) it is made in the financial year to a complying superannuation fund in respect of the person; and

b) it is included in the assessable income of the superannuation fund; and

c) it is not an amount mentioned in paragraph 291-25(2)(c) of the ITAA 1997.

Under paragraph 291-25(2)(c) of the ITAA 1997, concessional contributions do not include:

• transfers from foreign superannuation funds;

• roll-over superannuation benefits that consist of an element untaxed in the fund that does not exceed the untaxed roll-over amount for that individual; and

• a contribution made to a constitutionally protected fund (CPF).

Conditions set out in subsection 291-25(2) of the ITAA 1997 are cumulative in nature. Namely, for an amount to count as a concessional contribution, all the conditions set out in that provision must be met.

The term 'contribution' is not defined in the ITAA 1997, therefore, consistent with basic principles of statutory interpretation, its meaning must be determined according to the ordinary meaning of the words having regard to the context in which they appear.

Taxation Ruling TR 2010/1 explains the Commissioner's views as to the ordinary meaning of the term 'contribution' in so far as it is used in relation to a superannuation fund. At paragraph 4, TR 2010/1 states:

In the superannuation context, a contribution is anything of value that increases the capital of a superannuation fund provided by a person whose purpose is to benefit one or more particular members of the fund or all of the members in general.

With regard to roll-over superannuation benefits, at paragraph 17 TR 2010/1 states:

17. A roll-over superannuation benefit5 (other than a superannuation benefit that is paid from one superannuation interest of a member in a superannuation plan to another interest of that member in the same plan) … is a contribution as it increases the capital of the fund in the same way as any other transfer of funds or assets and is made to obtain superannuation benefits for a particular individual.

A roll-over superannuation benefit is defined in section 306-10 of the ITAA 1997 which provides that a superannuation benefit is a roll-over superannuation benefit if:

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

• it is paid from a complying superannuation plan; and

• it is paid to a complying superannuation plan.

In your case, the amount rolled over from DB Fund to your personal superannuation fund meets all of the above conditions, therefore it is a roll-over superannuation benefit. As such, it is considered to be a contribution for the purposes of subsection 291-25(2) of the ITAA 1997.

The table in subsection 295-190(1) of the ITAA 1997 sets out personal contributions and roll-over amounts that are included in the assessable income of a complying superannuation fund. Item 2 of the table includes in the assessable income of a fund:

A *roll-over superannuation benefit that an individual is taken to receive under section 307-15 to the extent that:

(a) it consists of an *element untaxed in the fund; and

(b) is not an *excess untaxed roll-over amount for that individual

Based on the above, the amount of the roll-over that does not exceed the untaxed plan cap amount for the financial year is included in the assessable income of a complying superannuation fund. However, it is specifically excluded from the definition of concessional contributions as one of the amounts mentioned in paragraph 291-25(2)(c) of the ITAA 1997. Therefore, that amount is not a concessional contribution for the purposes of section 291-20 of the ITAA 1997.

The amount of the roll-over (if any) that exceeds the untaxed plan cap amount is not included in the assessable income of a complying superannuation fund. That being the case, it fails paragraph 291-25(2)(b) of the ITAA 1997 and is not a concessional contribution for the purposes of subsection 291-25(2) of the ITAA 1997.

Based on all of the above, the amount rolled over from the DB Fund to your personal superannuation fund is not a concessional contribution and does not count towards your concessional contributions cap for the 2013-14 financial year.

Other relevant comments

We note that you may have notional taxed contributions in respect of your interest in the DB Fund for the financial year. In accordance with section 291-165 of the ITAA 1997, these notional taxed contributions, if any, are concessional contributions and may be taken into account for the purposes of your concessional contributions cap for the financial year.

If you require further information in regard to notional taxed contributions in respect of your interest in the DB Fund, please contact the DB Fund, as it is only DB Fund that can assist you in this matter.

Also, you mentioned in your request that you had been advised that the DB Fund is a constitutionally protected fund (CPF). Please be aware that CPFs are funds established by a State Act, or a specified provision of a State Act, mentioned in Schedule 4 the Income Tax Assessment Regulations 1997. As the DB Fund was established under Commonwealth Acts, it is not a fund established under a relevant State Act. The DB Fund is, therefore, not a CPF.