Issue
In determining the average age of entry of defined benefit members into a superannuation fund, can an actuary take into account a member's age at the time of their entry into a previous superannuation fund where a member's defined benefit interest (along with the interests of all the other defined benefit members within a related group) has been transferred to the current fund?
Decision
Yes. For the purposes of Part 3 of Schedule 1A to the Income Tax Assessment Regulations 1997 (ITAR 1997), an actuary can take into account a defined benefit member's age at the time of their entry into a previous superannuation fund that entitled the member to defined benefits if the actuary considers that it is reasonable to do so.
Facts
The member was an employee of X Company.
With other employees of X Company, the member was a member of the employer sponsored superannuation fund, X Super.
In April 2005, X Company was taken over by Y Company.
In May 2005, all members of X Super were transferred to Y Super.
In March 2007, Y Company was taken over by Z Company.
In June 2007, all members of Y Super were transferred to Z Super.
X Super, Y Super, and Z Super were all defined benefit superannuation funds.
The member is a member of Z Super on 1 July 2007.
Reasons for Decision
Subregulation 3.6(2A) of Part 3 of Schedule 1A to the ITAR 1997 explains: If: (a) on 1 July 2007, the defined benefit members of the fund include persons who have been, before becoming members of the fund, members of a predecessor fund; and (b) the actuary considers that it is reasonable to do so;
the actuary may use the age of entry of those members into the predecessor fund in determining the average age of entry.
The Explanatory Statement to Income Tax Assessment Amendment Regulations 2007 (No. 9) states that 'in working out the new entrant rate an actuary may use the relevant entrant ages from a predecessor fund (for example, a fund that has been merged into the current fund)'.
The member's defined benefit interest must have been transferred to the current fund along with the defined benefit interests of all the other members within a related group of the previous fund. Where there has been a succession of transfers of members within a related group, the member's age of entry to the earliest fund can be used provided sufficient evidence exists to determine when they joined the earliest fund.
In this particular case, X Super and Y Super are both predecessor funds (for the purposes of subregulation 3.6(2A) of Part 3 of Schedule 1A to the ITAR 1997) of Z Super as all the defined benefit members within a related group of X Super had their benefits transferred to Y Super and all the defined benefit members within a related group of Y Super had their benefits transferred to Z Super. Subregulation 3.6(2A) will apply provided the actuary considers it reasonable to use the age of entry of the members into the earlier funds to determine the average age of entry. The actuary may use the age of entry of the member into X Super in determining the average age of entry for Z Super.