Excess Contributions Tax: notional taxed contributions - meaning of defined benefit member - person not accruing benefits

Is a person who is entitled to a defined benefit from a defined benefit superannuation fund but is currently not accruing further defined benefits, 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 member who is entitled to a defined benefit from a defined benefit superannuation fund but is currently not accruing further defined benefits, is a defined benefit member of the fund for the purposes of regulation 292-170.02 of the ITAR 1997.

The WXY defined benefit superannuation fund has 52 members.

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

The remaining 48 members are entitled to defined benefits from the fund but for the 2007-08 income year did not accrue further defined benefits. These members have all reached the maximum benefit entitlement under the rules of the fund.

The 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. The definition does not include anything to suggest that a member who is entitled to a defined benefit from the fund even where they are not currently accruing further defined benefits should be excluded.

The WXY defined benefit fund which has 52 members, 4 of whom are accruing benefits and 48 of whom are not accruing further defined benefits in the fund has more than 5 defined benefit members. Accordingly, the WXY 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 who are not accruing further defined 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 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 | 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.