Issue
Will the Commissioner approve another method for the calculation of surchargeable contributions where an increase in benefits, is granted to a member of a defined benefits superannuation scheme who is in receipt of a pension that commenced to be paid on or before 20 August 1996 (or the pension commenced as a contingent benefit on the death of another pensioner whose pension commenced on or before 20 August 1996)?.
Decision
Yes. The amount of surchargeable contributions arising from any increase in the actuarial value of the member's pension can be calculated as nil, if the pension commenced on or before 20 August 1996 (or the pension commenced as a contingent benefit on the death of another pensioner whose pension commenced on or before 20 August 1996).
Facts
The scheme is a defined benefits superannuation scheme that has been closed to new members prior to 20 August 1996.
The pensions paid by the superannuation scheme commenced prior to 20 August 1996.
Reasons for Decision
Section 5 of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 (SCT) provides that the object of the SCT is to assess and collect surcharge on the surchargeable contributions of high income earners.
A high income earner is a person whose adjusted taxable income as defined in section 43 of the SCT, exceeds the threshold set out in section 9 of the SCT.
Subsection 8(3) of the SCT provides that the surchargeable contributions for a financial year for a member of a defined benefits superannuation scheme are the amounts that constitute the actuarial value of the benefits that accrued to, and the value of the administration expenses and risk benefits provided in respect of, the member for the financial year.
Subsection 8(4) of the SCT provides that surchargeable contributions for the years ended 30 June 1997, 1998 and 1999 are to be calculated using the formula: Annual salary * notional surchargeable contributions factors
where notional surchargeable contributions factors are worked out in accordance with the method set out in Superannuation Contributions Ruling SCR 97/1.
Subsection 8(5) of the SCT, in conjunction with regulation 2L, subregulation 2M(3) and Schedule 2 to the Superannuation Contributions Tax (Assessment and Collection) Regulations 1997, sets out the standard method for calculating surchargeable contributions for the year ended 30 June 2000 and later financial years - either by using: (i) the formula - annual salary x notional surchargeable contributions factor - where the notional surchargeable contributions factors are calculated in line with the standard set out in SCR 97/1; or (ii) the standard method set out in the Superannuation Contributions Tax (Assessment and Collection) Regulations 1997.
The attachment to the Treasurer's August 1996 Budget Press Release, introducing the superannuation contributions tax (surcharge), indicated the measure would not affect people already in retirement.