Crystallised segment of a superannuation interest

Is a complying superannuation fund required to recalculate the crystallised segment of a superannuation interest when an eligible person subsequently gives a notice under subsection 82AAT(1A) of the Income Tax Assessment Act 1936 (ITAA 1936) which is acknowledged by the trustee of that fund?

Yes, a complying superannuation fund is required to recalculate the crystallised segment of a superannuation interest when an eligible person subsequently gives a notice under subsection 82AAT(1A) of the ITAA 1936 which is acknowledged by the trustee of the fund.

A member of a superannuation fund is self-employed for the whole of the 2006-07 income year.

The person makes a contribution to their superannuation fund (a complying superannuation fund) during that year.

The member is an eligible person for the 2006-07 income year as defined in subsection 82AAS(2) of the ITAA 1936.

This superannuation fund is an accumulation fund.

Soon after 1 July 2007, the fund calculates the crystallised segment (as defined in section 307-225 of the Income Tax Assessment Act 1997 (ITAA 1997)).

Later in the 2007-08 income year the member gives a notice under subsection 82AAT(1A) of the ITAA 1936 (82AAT(1A) notice) to the trustee of the fund claiming the maximum allowable deduction in respect of the contributions that were made in the 2006-07 income year.

The trustee of the fund acknowledges receipt of the member's 82AAT(1A) notice. The trustee includes the amount being claimed as a deduction in the fund's assessable income in the 2007-08 income year.

A superannuation income stream is not paid to the member by the superannuation fund.

Under section 307-210 of the ITAA 1997 the tax free component of a superannuation interest includes the crystallised segment of that interest.

Section 307-225 of the ITAA 1997 explains how to work out the crystallised segment of a superannuation interest. This is done by assuming that an eligible termination payment (ETP) was made just before 1 July 2007 and that the amount of this 'notional ETP' is equal to the value of the superannuation interest at that time.

The crystallised segment is so much of the value of the interest as consists of the total of the components specified in subsection 307-225(2) of the ITAA 1997. One of these components is the undeducted contributions of the notional ETP.

As provided by subsection 307-225(4) of the ITAA 1997, the terms 'eligible termination payment' and 'undeducted contributions' have the same meaning as in subsection 27A(1) of the ITAA 1936 as in force just before 1 July 2007.

Undeducted contributions include member contributions made to the superannuation fund after 30 June 1983 for which no income tax deductions were allowable or were allowed to the member.

After the receipt of the 82AAT(1A) notice (and its acknowledgment by the trustee), the amount of undeducted contributions reflected in the original calculation of the crystallised segment will need to be adjusted as some of the member contributions in the 2006-07 income year have been claimed as an income tax deduction. The original calculation of the undeducted contributions by the trustee does not correctly reflect the actual amount of undeducted contributions in the notional ETP for the purposes of working out the crystallised segment.

Item 1 in the table in subsection 295-190(1) of the ITAA 1997 also requires that the amount which the member claims as an income tax deduction that is set out in an 82AAT(1A) notice must be included in the superannuation fund's assessable income. Subsection 295-190(1) of the Income Tax (Transitional Provisions) Act 1997 provides that an 82AAT(1A) notice in relation to the 2006-07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290-170 of the ITAA 1997. Note 1: a change in the undeducted contributions component may also affect the pre-July 1983 component because of the calculation performed under section 27AA of the ITAA 1936 which determines the pre-July 1983 amount under subsection 307-225(2) of the ITAA 1997.