Issue
Can a complying superannuation fund claim tax exemption under section 282B of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of any assets which exceed the value of current pension liabilities calculated by an actuary on a 'best estimate' basis?
Decision
No.
The amount of assets held by a complying superannuation fund that can be classed as segregated current pension assets under section 273A of ITAA 1936, for the purposes of claiming the tax exemption available under section 282B of ITAA 1936, may not exceed the value placed on the superannuation fund's current pension liabilities by an actuary as determined on a 'best estimate' basis.
Facts
The taxpayer is a superannuation fund.
The superannuation fund is required to obtain actuarial certificates for the purposes of section 282B of the ITAA 1936 in relation to segregated current pension assets.
Reasons for Decision
A complying superannuation fund as defined under section 267(1) of ITAA 1936 and section 45 of the Superannuation Industry (Supervision) Act 1993 can pay a pension to one or more members of the superannuation fund.
The assets of the complying superannuation fund are segregated current pension assets if the assets satisfy the conditions set out in section 273A of ITAA 1936.
To satisfy the conditions of section 273A of ITAA 1936, the trustee of the superannuation fund must obtain a certificate from an actuary which sets out the value of the superannuation fund's current pension liabilities (as defined in section 267(1) of ITAA 1936).
Taxation Ruling IT 2617 and mandatory Guidance Note 452 issued by the Institute of Actuaries of Australia provide further information for actuaries preparing a certificate under section 273A of ITAA 1936.
The Commissioner will accept a value placed on current pension liabilities by an actuary for the purposes of sections 273A and 282B of ITAA 1936, where the value has been determined by the actuary using a 'best estimate' basis. That is, the Actuary's assumptions should reflect a best estimate of the likely experience. The Commissioner does not accept that other valuation bases are appropriate for the purposes of section 273A of ITAA 1936.
The Commissioner relies on actuarial certification for the purposes of the administration of section 273A of ITAA 1936.
The Commissioner does not accept that the actuary's determination of current pension liabilities for this purpose should be influenced by other issues which are only incidental to an objective assessment of liabilities, for example, the trustee's desire to retain additional assets to ensure payment of pensions in the event of worse than expected mortality or investment experience, or the trustee's desire to obtain a positive opinion under regulation 9.31 of the Superannuation Industry (Supervision) Regulations.