Excess Contributions Tax: notional taxed contributions - meaning of defined benefit member - person entitled to a deferred benefit

Is a person who is entitled to a deferred benefit from a defined benefit superannuation fund a 'defined benefit member' of the fund for the purposes of regulation 292-170.02 of the Income Tax Assessment Regulations 1997 (ITAR 1997)?

Yes. A person who is entitled to a deferred benefit from a defined benefit superannuation fund is a 'defined benefit member' for the purposes of regulation 292-170.02 of the ITAR 1997.

The MNO defined benefit superannuation fund has 52 members.

During the 2007-08 income year, four of the members were accruing defined benefit entitlements in the fund.

The remaining 48 members have left the employment of the employer sponsor of the fund. None of them have reached normal retirement age and they have each elected to defer their benefits in the MNO fund. Their benefit in the MNO fund will be paid sometime in the future.

The MNO fund has asked whether the notional taxed contributions for its members should be determined using Schedule 1A of the ITAR 1997.

Notional taxed contributions are the contributions which are used to determine the amount of concessional contributions in respect of a person's defined benefit interest for excess concessional contributions tax.

Regulation 292-170.02 of the ITAR 1997 sets out when Schedule 1A of the ITAR 1997 is to be used to determine the amount of notional taxed contributions for the purposes of subsection 291-170(1) of the Income Tax Assessment Act 1997 (ITAA 1997). One of the requirements is that the superannuation fund has 5 or more defined benefit members.

There is no definition of 'defined benefit member' in regulation 292-170.02 of the ITAR 1997. However, the term is defined in regulation 995-1.01 of the ITAR 1997. This definition does not include anything to suggest that a fund member with deferred benefits should be excluded from the definition.

It is noted that there is a definition of 'defined benefit member' in subsection 3.6(2B) of the 'New entrant age' section of Part 3 of Schedule 1A of the ITAR 1997, and that definition excludes members that are receiving only pension benefits from the fund, and those that have deferred their benefit entitlement in the fund. That definition applies only for the purposes of section 3.6 of Part 3 of Schedule 1A of the ITAR 1997. The specific exclusion of these members indicates that deferred benefit members are meant to be included as defined benefit members for other purposes.

The MNO defined benefit fund which has 52 members, 4 of whom are accruing benefits and 48 of whom have deferred their benefit in the fund has more than 5 defined benefit members. Accordingly, the MNO defined benefit fund must use Schedule 1A of the ITAR 1997 to determine the notional taxed contributions for the members of the fund. Note 1: that it is possible that some or all of the 48 members with deferred benefits in the fund may satisfy the circumstances set out in regulation 292-170.04 of the ITAR 1997, which states when the notional taxed contributions in respect of the members' defined benefit interest will be considered to be nil. Note 2: from 1 July 2013, the rules for determining concessional contributions for defined benefit interests in section 292-170 have been repealed as part of the repeal of the excess contributions tax. These rules are now contained in section 291-170 of the ITAA 1997 . However, the regulations made for the purposes of former section 292-170 of the ITAA 1997 continue to apply to determine notional taxed contributions for the purposes of section 291-170 . Saving provisions in Subdivision 291-C of the ITAA 1997 ensure the continuing application of the excess concessional contributions tax system for the 2012-13 and prior financial years, despite the repeal of former section 292-170 of the ITAA 1997 .

Date of amendment Part Comment 7 February 2014 Facts Updated for clarity. Reason for Decision Section 292-170 of the ITAA 1997 has been repealed with effect from 1 July 2013 as part of the repeal of the excess contributions tax. Saving provisions contained in Subdivision 291-C of the ITAA 1997 ensure the continuing application of the excess concessional contributions tax system for the 2012-13 and prior financial years, despite the repeal of former section 292-170 of the ITAA 1997. Legislative references Updated. Siebel Reference Number Added.

Date of amendment | Part | Comment

7 February 2014 | Facts | Updated for clarity.

Reason for Decision | Section 292-170 of the ITAA 1997 has been repealed with effect from 1 July 2013 as part of the repeal of the excess contributions tax. Saving provisions contained in Subdivision 291-C of the ITAA 1997 ensure the continuing application of the excess concessional contributions tax system for the 2012-13 and prior financial years, despite the repeal of former section 292-170 of the ITAA 1997.

Legislative references | Updated.

Siebel Reference Number | Added.