• 8. Payment and interest

    8.1 Payment of deferred debts

    8.2 Payment of debt account discharge liability

    8.3 Payment of assessed Division 293 Tax

    8.4 Interest.

    After a liability of Division 293 tax has been determined, there are different payment options available depending on whether the person has accumulation or a defined benefit interests.

    8.1 Payment of deferred debts

    Voluntary Payments

    A person is not required to pay the amount of their assessed Division 293 tax that is deferred to a debt account within 21 days from the notice of assessment. Instead, the deferred tax is debited to the debt account the Commissioner keeps for a person’s defined benefit super interest.

    However, in accordance with section 133-70External Link of Schedule 1 to the TAA, a person can make voluntary payments to reduce the balance of the debt account at any time.

    Payments can be made from super monies (other than from defined benefit interests) using a release authority issued for the amount of the deferred tax or from other sources, such as after-tax money.

    The Commissioner will credit the debt account for voluntary payments by the person or if an amended assessment results in a reduced amount of deferred tax (the deferral reversal).

    When a voluntary payment is made, the Commissioner must:

    • acknowledge receipt of the payment
    • credit the payment to the debt account
    • notify the person of the revised balance of the debt account.

    If a debt account is extinguished before the end of the income year because the person pays the outstanding balance, no EOYI applies for that income year.

    8.2 Payment of debt account discharge liability

    The debt account discharge liability for an interest is payable 21 days after the day when the end benefit for that interest is paid, in accordance with section 133-110External Link of Schedule 1 to the TAA.

    Under subsection 133-105(3)External Link of Schedule 1 to the TAA, when a person pays their debt account discharge liability for a super interest, they discharge their liability for their assessed Division 293 tax that has been deferred to the debt account for that super interest for all income years that have been deferred.

    A person has the option to choose how they pay their debt account discharge liability:

    • with monies from their defined benefit super interest to which the debt account relates, using a release authority issued by the Commissioner
    • from other sources, such as after-tax income
    • a combination of both.

    Under subsection 135-40(3)External Link of Schedule 1 to the TAA, a release authority for a debt account discharge liability may only be given to the super provider that holds the defined benefit interests to which the liability relates. The release authority can be given to the super provider to have the amount of the liability paid directly to the Commissioner.

    Example 8.1 Paying debt account discharge liability

    The Commissioner issues a notice to Mark for a $20,000 debt account discharge liability for his defined benefit interests.

    The amount is due and payable 21 days from the date the end benefit was paid. The Commissioner also gives Mark a release authority.

    Mark can only give the release authority to the provider holding the defined benefit interests to which the debt relates.

    Mark gives the release authority to the super provider requesting that the amount of $20,000 be paid from his interest. This amount is paid directly to the Commissioner before the due and payable date.

    End of example

    8.3 Payment of Assessed Division 293 Tax

    Assessed Division 293 tax that has not been deferred is due and payable 21 days after the notice of assessment is issued.

    A person has the option to choose how they pay their assessed Division 293 tax:

    • with monies from an accumulation super interest using a release authority issued by the Commissioner
    • from other sources, such as after-tax income, or
    • a combination of both.

    Where a person with a Division 293 tax liability dies, the legal personal representative will be liable to pay the liability.

    8.4 Interest

    Shortfall interest charge

    Shortfall interest charge (SIC) applies where an amount of Division 293 tax becomes due and payable as a result of an amended assessment of Division 293 tax for an income year, or an amended debt account discharge liability that has become due and payable.

    SIC applies to the amount of an assessment for each day from the date that the first assessment of Division 293 tax was payable and ending on the day the amended notice of assessment was given by the Commissioner.

    Where an amended assessment reduces a liability and a later amended assessment reinstates all or part of that liability, SIC applies to the amount that is reinstated, from the due and payable date of the earlier amended assessment, in accordance with subsection 280-102B(4) of Schedule 1 to the TAA.

    Under subsection 280-102B(2) of Schedule 1 to the TAA, SIC does not apply to an amount of Division 293 tax arising as a result of an amended assessment that is deferred to a debt account. This is because the amount has not become due and payable.

    The Commissioner must give a person a notice stating the amount of the SIC liability. This amount can be included in another notice that the Commissioner gives to the person, such as the notice of the amended assessment.

    SIC is due and payable 21 days after the day on which the Commissioner gives the person notice of the charge. SIC is calculated in accordance with the general rules in Division 280 of Schedule 1 to the TAA.

    Example 8.2

    Mathew has two super funds: an APRA-regulated super fund and a SMSF.

    His APRA-related fund lodges the MCS on 31 October 2013, the same date Mathew lodges his 2012–13 income tax return.

    He receives a Division 293 tax notice of assessment (NOA) with a due and payable date 21 days after being issued – that is, 21 November 2013.

    His SMSF subsequently lodges its SMSF annual return on 15 May 2014 with further reportable super contribution information.

    Mathew is issued an amended Division 293 NOA on 30 June 2014.

    SIC has been charged from the due date of the original NOA, being 21 November 2013, until the day before the amended Division 293 NOA issued, being 29 June 2014.

    End of example
    Remission of shortfall interest charge

    In accordance with subsection 280-160(1)External Link of Schedule 1 to the TAA, a person can seek to have SIC that has been imposed remitted in whole (or part) if the Commissioner considers it fair and reasonable to do so.

    In addition, a person may object to a remission decision by the Commissioner where an unremitted amount of SIC exceeds 20% of the tax shortfall.

    General interest charge

    GIC is calculated in accordance with Part IIA of the TAA. The Commissioner may remit the GIC under the existing remission guidelines.

    Division 293 tax unpaid by the due and payable date

    Assessed Division 293 tax that is not deferred to a debt account is due and payable 21 days after the notice of assessment (or amended assessment) is given to a person by the Commissioner.

    GIC applies to an amount of assessed Division 293 tax, SIC or GIC for each day they remain unpaid.

    Debt account discharge liabilities unpaid by the due and payable date

    Debt account discharge liabilities are payable 21 days after the day when the end benefit for the relevant interest is paid. Amounts that remain unpaid after that time attract GIC for each day they are unpaid.

    Exercise 17

    Work it out

    Is the following statement true or false?

    A person is able to make voluntary payments to reduce the balance of their debt account.

    Answer 17

    Exercise 18

    Work it out

    Is the following statement true or false?

    A person has to pay their debt account discharge liability with monies from their defined benefit super interest to which the debt account relates, using a release authority issued by the Commissioner.

    Answer 18

    Assessment

    You have now reached the end of this learning product.

    There is no assessment for this course.

    By working through the material and undertaking the activities in this learning product, you have successfully completed the course.

    Conclusion

    High-income earners receive a larger tax concession on super contributions compared to average income earners.

    Concessional contributions are included within the assessable income of the super fund and are subject to a flat tax rate of 15%, regardless of the member’s income.

    These higher income earners essentially receive a 30% tax concession on their super contributions, where average income earners are receiving 17.5% tax concession.

    To make the superannuation system fairer, Division 293 will only affect a person whose income for surcharge purposes, plus their low-tax contributions, are greater than $300,000. An additional 15% tax will be imposed on those concessionally taxed super contributions, including defined benefit contributions that exceed the $300,000 threshold up to the concessional contributions cap.

    There are exceptions for some Commonwealth judges and justices and State higher level office holders, where they meet certain criteria.

    Division 293 tax is applied differently depending on whether or not the person has accumulation interests or defined benefit interests.

    It is important to note ECT in respect to concessional contributions was repealed from 1 July 2013 and has been replaced with FTECC.

    To make an assessment for Division 293 tax, the Commissioner will require a person’s income tax return and MCS and/or SAR.

    The Commissioner must make an assessment of a person’s Division 293 tax liability equal to 15% of taxable contributions. As a general rule, the Division 293 tax is due and payable 21 days after the Commissioner gives notice of the amount payable and notice of assessment.

    Special rules apply to certain deferred benefit payments where the amount payable is automatically subject to deferred payment.

      Last modified: 15 May 2015QC 43294