Issue
Is the superannuation provider liable to pay the surcharge assessment after it ceased to be the holder of the surchargeable contributions?
Decision
No. Under subsection 10(3) of the Contributions Tax (Assessment and Collection) Act 1997 (SCTA) the superannuation provider is not liable to pay surcharge where the superannuation provider ceases to be the holder of the contributions, or begins to pay a pension or annuity based on the contributions, before the notice of assessment is given to it.
Facts
The superannuation provider, which was a superannuation (accumulation benefits) provider, reported surchargeable contributions paid by an employer for the financial year in respect of the member.
The Commissioner of Taxation (Commissioner) issued a superannuation contributions tax assessment to the superannuation provider in respect of the surchargeable contributions reported for the member
The superannuation provider advised the Commissioner that the total of the surchargeable contributions previously reported for the member had been transferred out before the surcharge assessment on those contributions was made. A proportion of the surchargeable contributions was paid to the member as an eligible termination payment (ETP), and the balance had been rolled-over to another superannuation provider.
The Commissioner cancelled the assessment issued to the superannuation provider and removed its liability to surcharge on those contributions.
The Commissioner issued a superannuation contributions tax assessment to the member in respect of the surchargeable contributions which were included in the ETP paid to the member.
The Commissioner issued a superannuation contributions tax assessment to the member in respect of the surchargeable contributions which were included in the ETP paid to the member.
Reasons for Decision
Section 13 of the SCTA requires the superannuation provider to report to the Commissioner details of a member's total contributed amounts for each financial year including the member's surchargeable contributions. In addition, the superannuation provider is also required to report details of that part of the total contributed amounts transferred by the provider to the member or to another provider.
If the provider is the holder of the surchargeable contributions when the assessment of the surcharge of those contributions is made, the provider is liable to pay the surcharge (subsection 10(2) of the SCTA).
Subsection 10(3) of the SCTA states that the superannuation provider is not liable to pay surcharge where the superannuation provider ceases to be the holder of the contributions, or begins to pay a pension or annuity based on the contributions, before the notice of assessment is made.
The Commissioner issued a superannuation contributions tax assessment (the notice of assessment) to the superannuation provider for the financial year in respect of the member's surchargeable contributions reported by the provider.
However, prior to the receipt of the notice of assessment, the superannuation provider ceased to be the holder of the surchargeable contributions on which the surcharge assessment was made. A proportion of the contributions was rolled over to another superannuation provider, and the balance was paid the member as an ETP.
The Commissioner cancelled the assessment issued to the superannuation provider. The cancellation of the assessment recognised that, as the provider ceased to be the holder of the surchargeable contributions before the assessment was made, it was not liable to pay the surcharge on those contributions.