Issue
Where a taxpayer receives a lump sum payment and a pension from an overseas superannuation fund, and the lump sum payment is assessable under section 27CAA of the ITAA 1936, what is the amount of the 'accumulated entitlement' for the purposes of section 27CAA?
Decision
The accumulated entitlement is the portion of the amount properly payable that relates to the payment of the lump sum.
The portion relating to the payment of the lump sum is calculated by applying the relevant proportion ascertained with the following formulae: A / (A + B)
Where
'A' is the amount of the lump sum benefit received; and
'B' is the present value of the pension entitlement at the time when the lump sum benefit is received.
Facts
The taxpayer contributes to an overseas superannuation fund.
On reaching 75 years of age, the taxpayer elects to receive a lump sum payment and a reduced pension from the fund.
Reasons for Decision
Although lump sum superannuation paid jointly with a pension (including partial commutations) is clearly assessed under section 27CAA of the ITAA 1936, the section is silent as to whether the accumulated entitlement should be apportioned.
The Explanatory Memorandum to Act No. 181 of 1994 is also silent as to whether the accumulated entitlement should be apportioned.
The Commissioner considers that: • the accumulated entitlement should be the portion that relates to the payment of the lump sum; and • that where there is no immediate apparent basis for determining that portion, the formulae in paragraph 8 of Taxation Ruling IT 2272 be used.
This is consistent with the method for apportionment of 'purchase price' used in IT 2272.