Show at R6 the amount of income otherwise assessable for the income year, under Subdivision 295-C of the ITAA 1997, that the trustee of a complying superannuation fund or a complying approved deposit fund (the 'transferor') has agreed to transfer to a life insurance company or PST (the 'transferee') in which the fund holds investments. The amount of the transfer will be included in the transferee entity's assessable income instead. The transferor fund must hold sufficient investments in the transferee entity to cover the tax payable by the transferee as a result of the transfer, and the amount transferred cannot exceed the amount that would otherwise have been assessable income of the transferor under Subdivision 295-C of the ITAA 1997.
The agreement to transfer must be in writing, signed by both parties, must be made before the lodgment of this tax return, and cannot be revoked. The trustee can only make one agreement for an income year with a particular transferee.
R6 is used to determine R Assessable contributions.
Record keeping
Keep all relevant documents as evidence of the transferee's consent to accept the transfer of assessable contributions and the associated tax liability.
R6 is used to determine R Assessable contributions.
Example 3 should assist you in dealing with member contributions where the fund has transferred its tax liability to a life insurance company or PST. The 31.5% additional tax in respect of the no-TFN-quoted contributions must be paid by the fund, and the liability cannot be transferred to the life insurance company or PST.
Example 3: Superannuation fund transferring their liability
Example 3a: Complying superannuation fund where all members have quoted their TFN
A complying superannuation fund can transfer its tax liability on assessable contributions to a life insurance company or PST in which it holds investments, provided the requirements of section 295-260 of the ITAA 1997 are satisfied. The effect of the agreement is that the transferee investment vehicle pays the tax on the funds behalf.
The Natalie Superannuation Fund is a complying fund that is transferring its tax liability to a life insurance company (shown at R6 Transfer of liability to life insurance company or PST). The fund has sufficient investments in the transferee life insurance company to cover the tax payable by the transferee as a result of the transfer (calculated under section 295-260(6) of the ITAA 1997). The fund has $10,000 of assessable contributions (R Assessable contributions).
The taxable income of the fund is calculated as follows:
Calculation element |
Amount |
Rate |
Tax |
|---|---|---|---|
Income: Employer contributions |
$10,000 |
15% |
$1,500 |
Total Employer contributions |
$10,000 |
- |
$1,500 |
less Contributions excluded: Transfer to life company |
$10,000 |
15% |
$1,500 |
Total reduction of assessable income |
$10,000 |
- |
$1,500 |
Taxable income and gross tax |
Nil |
- |
Nil |
End of example
Example 3b: Complying superannuation fund with 'No TFN quoted' contributions
Superannuation funds cannot transfer the additional tax liability caused by 'no TFN quoted' contributions to a life insurance company or a PST.
The James Superannuation Fund is a complying fund. However, it has income which is taxed at different rates.
The fund has $10,000 of assessable contributions (shown at R Assessable contributions). Of the total employer contributions, $2,000 was for members who had not quoted their TFN (shown at R3 No-TFN quoted contributions) while the remaining $8,000 of contribution was for members who quoted their TFNs (shown at R1 Assessable employer contributions).
The fund has transferred all of its assessable contributions to a life company (shown at R6 Transfer of liability to life insurance company or PST). However, it must still pay the additional tax on the no-TFN-quoted income as the following table shows. The total rate of tax that applies to the no-TFN-quoted income is 46.5% (which is made up of 15% paid by the life insurance company or PST and an additional 31.5% paid by the fund). Even though the fund has transferred 100% of the contributions received, it is still liable for $630 tax for the no-TFN-quoted contributions. The tax amount of $630 is 31.5% of the $2,000 no-TFN-quoted contribution and is written at B Gross tax item 12.
Calculation element |
Amount |
Rate |
Tax |
|---|---|---|---|
Income: TFN-quoted contributions, plus |
$8,000 |
15% |
$1,200 |
No-TFN-quoted contributions |
$2,000 |
46.5% |
$930 |
Total Employer contributions |
$10,000 |
- |
$2,130 |
less Contributions excluded: Transfer to life company |
$10,000 |
15% |
$1,500 |
Total reduction of assessable income |
$10,000 |
- |
$1,500 |
Taxable income and gross tax |
Nil |
- |
$630 |
End of example