Taxation Ruling
IT 2492A - Addendum
Income tax : eligible annuities and eligible policies - unreasonable deferral of annuity income
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FOI status:
may be releasedADDENDUM
1. This Addendum deals with two issues affecting Taxation Ruling IT 2492.
2. The first issue involves an inconsistency in the requirement set out in paragraph 4 of IT 2492 regarding the maximum size of an increase in a guaranteed component of an annuity payment allowed under IT 2492 and the maximum amount of increase allowed under Regulation 4ZC of the Occupational Superannuation Standards Regulations (OSS Regulations).
3. The inconsistency arises as a result of the current low rates of increase in the Consumer Price Index (CPI). Paragraph 4 of IT 2492 provides that the rate of increase in the size of the guarantee component of an annuity should not exceed the average rate of increase for the previous three years in the All Groups CPI. Regulation 4ZC of the OSS Regulations provides that the rate of increase in the size of the guarantee component shall be at least 5% or at least the rate of increase in the CPI for the March quarter in the preceding year compared with the CPI for the March quarter in the year before the preceding year, whichever increase is the lesser. The inconsistency between these two requirements arises when the average of the last three years' CPI is less than both the rate of increase in the CPI and 5%.
4. To remove this inconsistency the third sentence of paragraph 4 of IT 2492 is amended to read:
"If a fixed rate is written into the contract it should not exceed 5% or the average rate of increase for the previous three years in All Groups Consumer Price Index, being the weighted average of the eight capital cities published by the Australian Statistician, whichever is the greater."
5. This amendment applies from 1 July 1992.
6. The second issue involves the updating of the Australian Life Tables published by the Australian Government Actuary. The current Australian Life Tables published by the Australian Government Actuary are the 1985-87 Life Tables.
7. Reference in paragraph 7 to the Australian Life tables 1980-1982 is to hereby replaced with the "Australian Life Tables 1985-87".
8. The 1985-87 Australian Life Tables were first published on 5 February 1992.
COMMISSIONER OF TAXATION
28 January 1993