Preamble
Nil.
Section 159SU allows a rebate of tax in respect of a "rebatable ETP annuity" included in assessable income under section 27H. The IA is such an annuity.
The amount of rebate is calculated as follows: (i) statutory formulae are applied to determine the intermediate percentage for each component of the purchase price of the annuity; (ii) these percentages are added together to provide the final percentage for the annuity; and (iii) the final percentage is the multiplied by the amount of the annuity assessable under section 27H to determine the section 159SU rebate.
A withdrawal from a DA is an ETP in terms of paragraph (g) of the definition of "eligible termination payment" in subsection 27A(1). This type of ETP is defined as a "commutation type ETP" under subsection 159SJ(1).
As the commutation type ETP was rolled-over to purchase the IA, the purchase price of the annuity will consist of a commutation component only. The intermediate and final percentages will therefore be the same.
Subsection 159SX(1) provides a formula for calculating the intermediate percentage for the commutation component. A multiplier in this formula is the underlying percentage. However, unless there is an underlying annuity which is also a rebatable ETP annuity, the underlying percentage is zero.
A rebatable ETP annuity is defined in subsection 159SJ(1). To come within the definition, it is necessary that an annuity first commenced to be payable on or after 1 July 1988. This condition is not met in the case of the DA.
Thus, although the DA is an underlying annuity in relation to the IA, it is not a rebatable ETP annuity. Consequently, the intermediate percentage for the purposes of section 159SX is zero.
The final percentage will likewise be zero and no rebate will be allowable under section 159SU in connection with the IA.
This result would not necessarily occur where the commutation of the DA occurs after an IA commences to be payable under the DA contract.