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Edited version of your written advice
Authorisation Number: 1012988339813
Date of advice: 23 March 2016
Ruling
Subject: Roll-over superannuation benefit consisting of a taxable component - element untaxed
Question
Is the untaxed element of a roll-over superannuation benefit received included in the assessable income of a fund?
Answer
Yes.
This ruling applies for the following period:
Income year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The fund (Fund A), is a single member self managed superannuation fund.
In late 20XX, Fund B provided a Rollover benefits statement to the trustee of Fund A, showing the roll-over of a superannuation benefit, for the benefit of the member of Fund A.
The Rollover benefits statement showed a taxable component - element untaxed in the fund.
The Fund has lodged a Self-Managed Superannuation Fund Annual Return (SAR) for the relevant income year and has included the untaxed element under Member Information, Inward amounts less any rolled in contributions.
The SAR for the relevant income year shows a nil amount at Income, Assessable personal contributions R2.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 280-35
Income Tax Assessment Act 1997 Section 295-160
Income Tax Assessment Act 1997 Subsection 295-190(1)
Income Tax Assessment Act 1997 Section 306-10
Income Tax Assessment Act 1997 Subsection 307-70(1)
Reasons for decision
Summary
The untaxed element of a roll-over superannuation benefit that a member is taken to receive is included in the assessable income of a superannuation fund in the year in which the benefit is received by the superannuation fund.
Detailed reasoning
Roll-over of superannuation benefits
Section 280-35 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a member can roll-over their superannuation benefits from one complying superannuation plan to another, or between different interests in the same plan.
In this case, the lump sum superannuation benefit was paid by Fund B (a complying superannuation fund), to Fund A (another complying superannuation fund) at the direction of the member. Therefore, in accordance with section 306-10 of the ITAA 1997, the lump sum paid from Fund B to Fund A is a roll-over superannuation benefit.
Personal contributions and roll-over amounts included in assessable income of a superannuation fund
Usually a roll-over superannuation benefit is not included in the assessable income of a complying superannuation fund (section 295-160 of the ITAA 1997).
However, item 2 of the table in subsection 295-190(1) of the ITAA 1997 will include in the assessable income of a complying superannuation fund a roll-over superannuation benefit 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 the relevant member.
An excess untaxed roll-over amount is the amount of a rolled over superannuation benefit that includes an amount that is an element untaxed in the fund and exceeds a person's untaxed plan cap amount for the relevant income year. The untaxed plan cap amount for the relevant income year was $1,255,000.
In this case, as the untaxed element is not in excess of the member's untaxed plan cap amount for the relevant income year in which the roll-over benefit was received, it must be included in the assessable income of the Fund in the year of receipt, by virtue of subsection 295-190(1) of the ITAA 1997.
Whilst the Fund's relevant SAR shows that the untaxed element was most likely included in the Member Information, Inward amounts less any rolled in contributions, the untaxed element of the roll-over benefit was not included as part of the Fund's assessable income for that income year.
The Self-managed superannuation fund annual return instructions 2013 state on page 18, under R2 Assessable personal contributions, Show at R2 the total of assessable personal contributions:
Other personal contributions that are included in the SMSF's assessable income include:
• the untaxed element of a rollover superannuation benefit that a member is taken to receive under section 307-15 of the ITAA 1997 to the extent that it is not an excess untaxed rollover amount (An amount will be an excess untaxed rollover amount if it exceeds $1.255 million). It is included in the income year in which it is received by the fund.
In this case, the trustee of Fund A can therefore amend the Fund's relevant SAR to include under R2 Assessable personal contributions the untaxed element of the roll-over benefit paid from Fund B to Fund A, if that was the year in which the roll-over benefit was received.