Edited version of administratively binding advice

Authorisation Number: 1051620050665

Date of advice: 10 March 2020

Subject: Division 293 of the Income Tax Assessment Act 1997 (ITAA 1997)

Ruling

Question

Will superannuation guarantee contributions made to a constitutionally protected superannuation fund during the 2018-19 income year impact the calculation of the tax imposed by Division 293 of the ITAA 1997 for the 2019-20 income year if they are subject to a contribution splitting arrangement with your spouse and their superannuation fund during the 2019-20 income year?

Answer

No

Refer to 'Reasons for decision.'

This advice applies for the following periods

Income year ending 30 June 2019 and 30 June 2020

This scheme commenced on

1 July 2018

We considered these to be the relevant facts

1.      We received an application for a private ruling from you about the application of the tax imposed by Division 293 of the ITAA 1997 to State Higher Level Office Holders and contribution splitting.

2.      In the application for a private ruling we received, you advised the following:

·  You are a Magistrate.

·  You are a State Higher Level Office Holder.

·  Your only superannuation contributions for the 2018-19 income year were superannuation guarantee contributions that were contributed to a constitutionally protected superannuation fund.

·  You previously received a private ruling from the Australian Taxation Office which confirmed that you had no liability for the tax imposed by Division 293 of the ITAA 1997 for the 2013-14 income years onwards notwithstanding that your income was above the relevant threshold. The private ruling was based on copies of your Magistrate Commissions, your superannuation fund statements as well as information that confirmed that your superannuation fund was a constitutionally protected superannuation fund. These facts have remained unchanged since the private ruling was issued.

·  You are now considering whether you should enter into a contribution splitting arrangement with your spouse which would involve making an application to your superannuation fund to split an amount of your untaxed splittable employer contributions that were contributed during the 2018-19 income year.

·  You are not closing your superannuation account and therefore your application to your superannuation fund can only be made in the following income year.

·  You may enter into a contribution splitting arrangement in following income years.

·  You have a spouse.

·  Your spouse is not a State Higher Level Office Holder and his income is below the relevant threshold.

·  Your spouse's superannuation fund is also a constitutionally protected superannuation fund.

3.      In a telephone conversation between yourself and a tax officer at the Australian Taxation Office, you advised that your spouse had lodged the application for a private ruling on your behalf. You authorised them to discuss the application for a private ruling on your behalf with the Australian Taxation Office. We advised that we would contact your spouse if we required any further clarification or information.

4.      In a telephone conversation between a tax officer at the Australian Taxation Office and your authorised contact, we were advised that your superannuation contributions were not subject to the tax imposed by Division 293 of the ITAA 1997 (with the exception of salary packaged contributions). We were advised that you were considering equalising the amounts you and your spouse had in superannuation through contribution splitting and your spouse did not earn enough income to be subject to the tax imposed by Division 293 of the ITAA 1997. We were advised that you would not enter into a contribution splitting arrangement if it meant you had to pay more tax.

5.      In the telephone conversation between a tax officer at the Australian Taxation Office and your authorised contact, we also clarified the issues raised in your application for a private ruling and discussed whether it should be actioned as a request for administratively binding advice as general guidance only was not suitable. We confirmed the service standard and discussed the operation of Division 293 of the ITAA 1997.

6.      In a telephone conversation between a tax officer at the Australian Taxation Office and your authorised contact, we provided an update regarding the progress of your application for a private ruling.

7.      In a telephone conversation between a tax officer at the Australian Taxation Office and your authorised contact, we provided an update regarding the progress of your application for a private ruling and confirmed that it should be actioned as a request for administratively binding advice. We discussed the operation of Division 293 of the ITAA 1997, contribution splitting as well as the protections offered for administratively binding advice.

8.      In a telephone conversation between a tax officer at the Australian Taxation Office and your authorised contact, we discussed the request for administratively binding advice. We confirmed the question which would be answered within the request for administratively binding advice as well as the income years that would be covered. We also confirmed that general guidance would be provided on contribution splitting applications.

We formed our view on the facts by relying on this information

·  Your application for a private ruling we received.

·  A telephone conversation between yourself and a tax officer at the Australian Taxation Office.

·  Telephone conversations between a tax officer at the Australian Taxation Office and your authorised contact.

Assumption

·  You have entered into a valid contribution splitting arrangement with your spouse and their superannuation fund.

Relevant legislative provisions

Income Tax Assessment Act 1997, section 291-25

Income Tax Assessment Act 1997, Subdivision 295-C

Income Tax Assessment Act 1997, Division 293

Superannuation (Sustaining the Superannuation Contribution Concession) Imposition Act 2013

Income Tax Assessment Regulations 1997, regulation 293-145.01

Reasons for decision

Summary

9.      Superannuation guarantee contributions made to a constitutionally protected superannuation fund during the 2018-19 income year will not impact the calculation of the tax imposed by Division 293 of the ITAA 1997 for the 2019-20 income year if they are subject to a contribution splitting arrangement with your spouse and his superannuation fund during the 2019-20 income year.

Detailed reasoning

The meaning of the term 'contribution'

10.   Taxation Ruling TR 2010/1 Income tax: superannuation contributions explains the meaning of the term 'contribution' so far as it is used in relation to superannuation funds, approved deposit funds and retirement savings accounts within the ITAA 1997.

11.   It states that a contribution is anything of value that increases the capital of a superannuation fund. It also confirms that a contribution will be made once the funds have been received by the superannuation provider.

Concessional contributions

12.   A concessional contribution is a contribution that has been:

·         made in the income year to a complying superannuation plan in respect of a person; and

·         included in the assessable income of the superannuation provider in relation to the plan or, by way of a roll-over superannuation benefit, in the assessable income of a complying superannuation fund or retirement savings account provider in certain circumstances regarding successor funds; or

·         allocated by the superannuation provider in relation to the plan for a person for the year in accordance with certain conditions specified in the regulations.

13.   However, an amount is not a concessional contribution if it:

·  has been transferred from a foreign superannuation fund under certain circumstances; or

·  is a roll-over superannuation benefit received for a person to the extent that it consists of an element untaxed in the superannuation fund which is not an excess untaxed roll-over amount for that person.

14.   The income tax exemption for constitutionally protected superannuation funds and excluded contributions is disregarded for the purposes of determining whether a contribution is a concessional contribution under section 291-25 of the ITAA 1997.

15.   Roll-over superannuation benefits are not included in the assessable income of a superannuation provider except in very limited circumstances, such as where a roll-over superannuation benefit has been received for a person to the extent that it consists of an element untaxed in the superannuation fund which is not an excess untaxed roll-over amount for that person.

Division 293 of the ITAA 1997

16.   If a person has taxable contributions for an income year, they will be required to pay the tax imposed by Division 293 of the ITAA 1997. The amount of tax payable is set out in the Superannuation (Sustaining the Superannuation Contribution Concession) Imposition Act 2013.

17.   A person will have taxable contributions for an income year if the sum of their income for surcharge purposes for the income year (disregarding their reportable superannuation contributions) and their low tax contributions for the income year exceed $250,000.00. The amount of their taxable contributions for the income year will equal the lesser of their low tax contributions or the amount of the excess.

18.   For Division 293 of the ITAA 1997, a person's income for surcharge purposes equals:

·         the sum of their:

·         taxable income for the income year (disregarding any assessable First Home Super Saver amounts released for the income year and any amounts subject to family trust distribution tax which is not assessable);

·         reportable fringe benefits (if any) for the income year; and

·         total net investment loss for the income year.

  less:

·      any superannuation lump sums that have a taxable component with a 0% tax rate.

19.   A person's low tax contributions for an income year is the amount of their low tax contributed amounts less their excess concessional contributions for the income year (if they have any). A person's low tax contributed amounts for the income year is equal to the sum of their concessional contributions. A person will only have excess concessional contributions if their concessional contributions for the income year have exceeded the concessional contributions cap.

Modifications for State Higher Level Office Holders

20.   If a person is a State Higher Level Office Holder, any contributions made to a constitutionally protected superannuation fund (other than salary packaged contributions) are not included in their low tax contributed amounts for the income year.

21.   A State Higher Level Office Holder is:

·  a Minister of the government of a State;

·  a member of the staff of a Minister of the government of a State;

·  the Governor of a State;

·  a member of staff of the Governor of a State;

·  a member of the Parliament of a State;

·  the Clerk of a house of the Parliament of a State;

·  the head of a Department of the Public Service of a State or a statutory office holder of equivalent seniority, including a statutory office holder who is the head of an instrumentality or agency of a State; or

·  a judge, justice or magistrate of the court of a State.

22.   However, this modification is disregarded for the purposes of working out the extent to which their income for surcharge purposes for the income year (disregarding their reportable superannuation contributions) and their low tax contributions exceed $250,000.00.

Application to your circumstances

23.   The superannuation guarantee contributions made to your superannuation fund during the 2018-19 income year formed part of your concessional contributions for the 2018-19 income year as they would have been included in the assessable income of your superannuation fund had the income tax exemption for constitutionally protected superannuation funds been disregarded.

24.   You are a State Higher Level Office Holder and therefore the tax imposed by Division 293 of the ITAA 1997 for the 2018-19 income year was modified to ensure that your taxable contributions equalled the lesser of:

·         the sum of your income for surcharge purposes (disregarding your reportable superannuation contributions) and your low tax contributions (including the contributions made to your superannuation fund) that exceeded $250,000.00 for the 2018-19 income year.

·         your low tax contributions (not including the contributions made to your superannuation fund) for the 2018-19 income year.

25.   The calculation of the tax imposed by Division 293 of the ITAA 1997 for the 2019-20 income year will also be modified as you are a State Higher Level Office Holder but it will not include contributions made to your superannuation fund during the 2018-19 income year that are now subject to a contribution splitting arrangement with your spouse and his superannuation fund.

26.   As the amount to be split with your spouse under a contribution splitting arrangement will not be a concessional contribution for him, it will not be counted towards his concessional contributions cap for the 2019-20 income year.