Part IX taxation of superannuation entities - Failure to elect to become a regulated fund.

Whether the superannuation fund, assessed as a non-complying fund due to the fund's failure to elect to become a regulated superannuation fund under the Superannuation Industry (Supervision) Act 1993 (SISA), can be reassessed as a complying superannuation fund now that the fund has elected to become a regulated fund and lodged all outstanding regulatory returns?

Yes, a non-complying superannuation fund can be reassessed as a complying superannuation fund where it's compliance status was confirmed by the Australian Prudential Regulation Authority (APRA).

The fund lodged returns and self assessed at a tax rate of 15% applicable to complying superannuation funds.

An Australian Taxation Office (ATO) review of the fund concluded that the fund was a non-complying fund for the previous four years. The decision was based upon information provided by APRA that the fund had failed to elect to become a regulated entity under the SISA.

The ATO issued amended assessments under subsection 300A(2) of the Income Tax Assessment Act 1936 (ITAA 1936) for each year, re-assessing the fund as a non-complying fund and imposing a tax rate of 47% as prescribed by subsection 26(2) of the Income Tax Rates Act 1986 (ITRA). Penalties and interest were also imposed.

The trustees of the fund objected to the assessments stating that the fund had lodged an election to become a regulated fund but that APRA had failed to process this election.

An election for the fund to become regulated under SISA was lodged by the trustees of the fund and had been accepted by APRA. Outstanding regulatory returns were also lodged, and an acknowledgment of the fund's election to become regulated, and certificates of compliance were provided to the trustees by APRA.

To be eligible for concessional taxation treatment under Part IX of the ITAA 1936 (in accordance with the rates of tax set out in subsection 26(1) of the ITRA) a superannuation fund must be a 'complying superannuation fund'. 'Complying' status is achieved by obtaining a notice under the SISA from the APRA that the fund is a complying superannuation fund. To obtain a notice of compliance from APRA, a fund must be a 'resident regulated superannuation fund' and comply with the SISA.

The primary condition for a fund to be a regulated superannuation fund is that the trustee/s must irrevocably elect for the SISA to apply to the fund and must provide the election in the approved form to APRA.

The fund, subsequently provided APRA with a written election to become a regulated fund under the SISA. APRA formally acknowledged the fund's election to become a regulated fund and, upon lodgment and review of regulatory returns for each financial year, provided the fund with a certificate of compliance in respect of the 1993 and 1998 financial years.

The notice of a fund's complying status applies to all subsequent years unless a written notice is issued to the fund notifying the fund of it's non-compliance in relation to a particular and subsequent financial years.

This fund has not received a subsequent written notice of non-compliance from APRA in relation to any financial year.

Accordingly, the fund is a complying fund.