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Edited version of your written advice
Authorisation Number: 1012769806482
Ruling
Subject: Exempt pension income
Question 1
Is Trust X's approach in calculating exempt income referable to investments held by its unitholders on behalf of their pension members in accordance with subsection 295-400(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
This ruling applies for the following periods:
1 July 20XX to 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
1. Trust X is a pooled superannuation trust (PST) within the meaning of section 48 of the SIS Act and a complying superannuation entity pursuant to section 995-1 of the ITAA 1997 for which A Co is the trustee.
2. A Co is responsible for the management and investment of the assets of a number of superannuation funds which holds units in Trust X.
3. Trust X has many different classes of units including the taxed units and untaxed units held by the unitholder superannuation funds for their members who are in accumulation phase and pension phase.
4. Trust X proposes an approach to calculate the exempt pension income of Trust X for the pension options under subsection 295-400(3) of the ITAA 1997 based on its interpretation of the intent of the provision
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 295-385
Income Tax Assessment Act 1997 Section 295-400
Income Tax Assessment Act 1997 Subsection 295-400(1)
Income Tax Assessment Act 1997 Subsection 295-400(3)
Reasons for decision
5. Subsection 295-400(1) of the ITAA 1997 sets out a formula for calculating the proportion of exempt income of a PST based on the average number of units held in the PST that are segregated current pension assets. It provides:
295-400(1) |
This proportion of the *ordinary income and *statutory income that would otherwise be assessable income of a *pooled superannuation trust is *exempt income:
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Average number of units in the trust during the income year that are *segregated current pension assets of unitholders that are *complying superannuation funds _________________________________________________________ |
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Average number of units in the trust during the income year |
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6. Subsection 295-400(3) of the ITAA 1997 provides an alternative method to exempt amounts of assessable income of the PST. It states:
Alternative exemption 295-400(3) |
However, the trustee of the *pooled superannuation trust can choose that a different amount be *exempt income of the trust under this section if a percentage of the assessable income of the trust would have been exempt income under section 295-385 or 295-390 if it had been *derived instead by the unitholders in the trust in proportion to their holdings.
7. The Applicant provided information to the Commissioner which illustrates that the exempt pension income calculated under Trust X's approach is equivalent to that which could have been claimable under section 295-385 of the ITAA 1997 by the unitholder superannuation funds had they held the assets directly.
8. Having regard to the information provided, the Commissioner is satisfied that the approach used by Trust X in calculating its exempt pension income under subsection 295-400(3) of the ITAA 1997, is in accordance with the policy intent of the legislation.