House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Employment and Workplace Relations and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)

Chapter 5 - Sustaining the superannuation contribution concession: assessment and payment

Outline of chapter

5.1 This Chapter explains the assessment of Division 293 tax and the payment arrangements that apply under the Income Tax Assessment Act 1997 (ITAA 1997) and the Taxation Administration Act 1953 (TAA 1953).

Summary of new law

5.2 The amount of Division 293 tax is, generally, either:

•

due and payable within 21 days after the notice of assessment is issued, to the extent the tax relates to a superannuation interest that is an accumulation interest;

•

deferred for later payment and included in a debt account maintained by the Commissioner of Taxation (Commissioner) to the extent the tax relates to a superannuation interest that is a defined benefit interest; or

•

due and payable within 21 days after a superannuation benefit is paid from the defined benefit interest for which a debt account is maintained by the Commissioner.

5.3 The Commissioner must issue release authorities to allow amounts to be released. Generally, an amount may only be released from a superannuation interest other than a defined benefit interest (that is, an accumulation interest) to facilitate payment of liabilities for Division 293 tax. However, where the liability for an amount that has been deferred to a debt account (the debt account discharge liability) becomes payable, the Commissioner must issue a release authority to allow an amount to be released from the defined benefit interest to which the deferred liability relates.

Detailed explanation of the new law

Overview of assessment and payment

Assessment and payment - accumulation interests

5.4 The Commissioner must issue a notice of assessment to an individual that states the amount of their assessed Division 293 tax for an income year. The amount of assessed tax is generally due and payable 21 days after the Commissioner gives the notice of assessment (or amended assessment). Amounts that remain unpaid after that period are subject to the general interest charge.

5.5 The Commissioner must also issue a release authority to an individual to enable an amount to be paid from any accumulation interest of the individual to facilitate payment of all or part of the assessed Division 293 tax that is due and payable.

Assessment and payment - defined benefit interests

5.6 The Commissioner must make a determination of tax that is deferred to a debt account to the extent that an individual's Division 293 tax is defined benefit tax where the interest to which the tax is attributable is eligible for deferral. The determination must specify the amount of assessed tax that is deferred to a debt account. This specified amount of tax is debited to a debt account for the superannuation interest maintained by the Commissioner. Only defined benefit tax may be deferred to a debt account.

5.7 An amount of defined benefit tax may not be specified in a determination of tax deferred to a debt account if the end benefit has become payable for the relevant superannuation interest, or if the Commissioner has issued a notice requiring payment of the debt account discharge liability in relation to the relevant superannuation interest.

5.8 An individual's defined benefit tax is worked out according to the following formula.

Division 293 tax for the income year * [Defined benefit contribution component / taxable contributions for the income year]


5.9 Generally, the same proportion of an individual's total Division 293 tax is defined benefit tax as the individual's defined benefit contributions make up of their taxable contributions. Special rules are included to address cases where not all of an individual's low tax contributions are subject to Division 293 tax and where an individual has excess concessional contributions.

5.10 The Commissioner keeps a debt account, to which interest is debited annually, for each superannuation interest where an amount of Division 293 tax has been deferred to a debt account for that interest. The Commissioner must notify the superannuation provider when a debt account is established for assessed Division 293 tax that is deferred to a debt account.

5.11 The Commissioner will credit the debt account for voluntary payments by the individual and if an amended assessment results in a reduced amount of deferred tax (deferral reversal).

5.12 A release authority is issued to the individual at the time of issuing the determination of tax that is deferred to a debt account to enable an amount to be paid from a superannuation interest (other than a defined benefit interest) of the individual to make voluntary payments to reduce the debt account balance.

5.13 In most cases, an individual will not be liable to pay their Division 293 tax that is deferred to a debt account until a superannuation benefit (the end benefit) becomes payable from the interest. However, if the relevant benefit is a death benefit, liability is treated as arising just before the individual dies.

5.14 Certain superannuation benefits are not end benefits, including a roll-over or transfer to a successor fund that is a complying superannuation fund, amounts released for severe financial hardship or on compassionate grounds and other superannuation benefits that may be specified by legislative instrument.

5.15 As soon as the individual requests that the first benefit be paid from a defined benefit interest that has an associated debt account, the individual and the superannuation provider must notify the Commissioner. The superannuation provider must also notify the Commissioner if a superannuation benefit becomes payable without a request by an individual (for example, if a death benefit becomes payable).

5.16 The Commissioner then calculates the debt account discharge liability and issues a notice for the amount of the liability to the individual, which is due and payable 21 days after the benefit is paid. The debt account discharge liability is generally the amount the deferred tax debt account is in debit. However, the amount of the liability does not exceed the end benefit cap.

5.17 This ensures that individuals are protected and do not pay Division 293 tax on defined benefit contributions for benefits they do not end up receiving. A release authority is issued to the individual, to allow the individual to release an amount from their superannuation interest to which the debt account relates to assist with payment of the debt account discharge liability. Unlike other release authorities that apply under these amendments, this release authority may only be provided to the superannuation fund that holds the relevant superannuation interest. This reflects that sufficient funds will generally be held in the superannuation interest from which the benefit is payable to meet the liability.

Purpose of release authorities

5.18 A release authority is issued to individuals by the Commissioner because generally, individuals are prevented from withdrawing money from superannuation interests until they have reached preservation age or retired. Where the individual gives a superannuation provider a release authority, the individual can withdraw an amount from certain superannuation interests for the purpose of paying their Division 293 tax liability, making voluntary payments of Division 293 tax that has been deferred to a debt account or paying their debt account discharge liability. Individuals may also pay their Division 293 tax liabilities from other sources, such as with after tax income.

Overview diagram

5.19 A diagram summarising the assessment and payment mechanisms for the Division 293 tax is set out in Diagram 5.1.

Assessments for Division 293 tax

5.20 Assessments are made by the Commissioner for Division 293 tax for an income year. The Commissioner may also make a determination in relation to assessed Division 293 tax that specifies how much of the tax is attributable to a defined benefit interest and is deferred to a debt account.

The Commissioner

5.21 The Commissioner makes an assessment of an individual's Division 293 tax for an income year and issues the assessment to the individual as soon as practicable after the assessment is made. The tax is payable annually by individuals with income, including certain superannuation contributions, for an income year above $300,000. The assessed Division 293 tax is 15 per cent of low tax contributions that exceed the $300,000 threshold. The notice of assessment is issued to individuals stating the amount of their assessed Division 293 tax.

5.22 The making of the assessment is governed by the generic assessment provisions in Division 155 in Schedule 1 to the TAA 1953. Subsection 155-5(1) gives the Commissioner a general power to make an assessment of an assessable amount. Subsection 155-35(1) gives the Commissioner the power to amend an assessment of an assessable amount within the period of review for the assessment. The Commissioner's power to make and amend assessments is restricted by the operation of other sections within Division 155.

5.23 The amendments include Division 293 tax payable in the generic assessment provisions in Schedule 1 to the TAA 1953. This is achieved by including an amount of Division 293 tax payable for an income year as an assessable amount for which the Commissioner can make an assessment in section 155-5 in Schedule 1 to the TAA 1953. [Schedule 3, Part 1, item 3, paragraph 155-5(2)(f) of Schedule 1 to the TAA 1953]

5.24 Division 293 tax is not subject to the self-assessment regime that applies to a range of taxes, including income tax. A note is added by the amendments to clarify that self-assessment does not apply to Division 293 tax. This reflects that, in addition to income tax returns, the Commissioner also requires information statements from superannuation providers before making an assessment. [Schedule 3, Part 1, item 4, note to subsection 155-15(1) of Schedule 1 to the TAA 1953]

5.25 Section 155-30 in Schedule 1 to the TAA 1953 provides that if a taxpayer has lodged a return and has not been given a notice of assessment in relation to the assessable amount within six months of lodging the relevant return, the taxpayer may give the Commissioner a notice requiring the Commissioner to issue a notice of assessment. The amendments provide that section 155-30 does not apply to Division 293 tax payable and individuals cannot require the Commissioner to make an assessment of Division 293 tax six months after they have lodged their income tax return. This reflects that assessments of Division 293 tax are also based on information from statements lodged by superannuation providers. [Schedule 3, Part 1, item 5, subsection 155-30(3) of Schedule 1 to the TAA 1953]

5.26 As mentioned above, the Commissioner requires both an individual's income tax return to be lodged and the information to have been given by superannuation providers to the Commissioner in member contributions statements and/or self-managed superannuation fund (SMSF) annual returns to make an assessment of Division 293 tax. In many instances the information statements will not be lodged with the Commissioner by the superannuation provider within six months of the date the individual lodges their income tax return.

5.27 Where an individual with a Division 293 tax liability dies, the Commissioner issues the assessment in the same way as if the individual had not died. However, because of the deceased's death, the deceased's legal personal representative is liable to pay the liability from the deceased's estate. The liability is worked out in the same way as if the deceased was liable to pay the Division 293 tax. [Schedule 3, Part 2, section 133-120 and note 2 to subsection 133-105(2) of Schedule 1 to the TAA 1953)]

5.28 The framework in the tax law that provides for the review of the Commissioner's decision to make an assessment or to amend an assessment applies to assessments of Division 293 tax. Individuals who are dissatisfied with an assessment of Division 293 tax may lodge an objection to the assessment or amended assessment consistent with Part IVC of the TAA 1953.

The superannuation provider

5.29 Division 390 in Schedule 1 to the TAA 1953 sets out reporting obligations for superannuation providers. Superannuation providers are required to provide member contribution statements to the Commissioner in the approved form in respect of individuals who were members at any time in the reporting period (generally, a financial year). This information is used by the Commissioner in making an assessment of Division 293 tax.

5.30 Under section 390-5 in Schedule 1 to the TAA 1953, a superannuation provider must give the Commissioner a statement including contributions made to the superannuation plan for an individual during the financial year. The statement may contain other information required by the Commissioner. Under the amendments superannuation providers are also required to report to the Commissioner the amount of defined benefit contributions in relation to a defined benefit interest in the superannuation plan. [Schedule 3, Part 2, item 35, paragraph 390-5(9A)(d) of Schedule 1 to the TAA 1953]

5.31 An individual can make a complaint to the Superannuation Complaints Tribunal under the Superannuation (Resolution of Complaints) Act 1993 if they are dissatisfied with a statement given to the Commissioner by a superannuation provider under section 390-5 in Schedule 1 to the TAA 1953. [Schedule 3, Part 2, item 15, note to subsection 155-90(1) of Schedule 1 to the TAA 1953]

5.32 The amendments also provide that complaints regarding the reporting of the amount of defined benefit contributions and the amount of the end benefit cap by superannuation providers to the Commissioner may be taken by individuals to the Superannuation Complaints Tribunal. [Schedule 3, Part 2, items 11 and 12, paragraphs 15CA(1)(ba ), ( bb) and (c) and 15CA(2)(ba ), ( bb) and (c) of the Superannuation (Resolution of Complaints) Act 1993]

When assessed Division 293 tax is due and payable

Overview

5.33 The time at which the assessed Division 293 tax becomes due and payable to the Commissioner differs depending on whether the amount assessed is attributable in whole or part to a defined benefit interest.

5.34 As a general rule, assessed Division 293 tax is due and payable 21 days after the Commissioner gives an individual notice of the assessment of the amount of tax payable for an income year. This will be the outcome for the majority of superannuation interests.

5.35 Special rules apply for Division 293 tax attributable to certain defined benefit interests. To the extent that assessed tax is attributable to certain defined benefit interests, it is automatically subject to deferred payment. The amount subject to deferred payment is so much of the assessed tax stated in a determination made by the Commissioner to be deferred to a debt account.

Assessed Division 293 tax is due and payable - accumulation interests

5.36 Assessed Division 293 tax is due and payable 21 days after the Commissioner gives a notice of assessment (or amended assessment). Amounts that remain unpaid after that period are subject to the general interest charge. The Commissioner may remit the general interest charge where appropriate, having regard to the existing remission guidelines. [Schedule 3, Part 1, item 1, subsections 293-65(1) and 293-70(1) and section 293-75 of the ITAA 1997]

5.37 A release authority is issued to the individual by the Commissioner which the individual can use to authorise a superannuation provider to release an amount from a superannuation interest (other than a defined benefit interest) of an individual to pay some or all of the assessed Division 293 tax that is due and payable. The individual does not have to use the release authority and can choose to pay the liability from other sources. [Schedule 3, Part 1, item 2, Division 135 of Schedule 1 to the TAA 1953]

5.38 The assessed Division 293 tax is a tax-related liability for the purposes of general tax administration by the Commissioner. This enables an unpaid amount of assessed Division 293 tax to be treated like any other tax debt. Accordingly, the Commissioner may take legal action to recover an outstanding debt for Division 293 tax that remains unpaid after it is due and payable. An amendment is made to include references to a liability to Division 293 tax in the index of tax-related liabilities in Schedule 1 to the TAA 1953. [Schedule 3, Part 2, item 17, table item 38BB in subsection 250-10(2) of Schedule 1 to the TAA 1953]

Assessed Division 293 tax that is deferred - defined benefit interests

5.39 Whilst an assessed Division 293 tax liability relating to contributions to a superannuation interest (other than a defined benefit interest) is due and payable 21 days after the assessment is given, payment of Division 293 tax liability for contributions attributable to defined benefit interests is generally deferred until 21 days after the end benefit is paid from the superannuation interest. [Schedule 3, Part 1, items 1 and 2, subsections 293-65(2) and 293-70(2) of the ITAA 1997 and section 133-105 of Schedule 1 to the TAA 1953]

5.40 Payment of assessed Division 293 tax is deferred for defined benefit superannuation interests because generally funding for member benefits in defined benefit funds is pooled and it would be difficult to adjust a member's benefit if a payment was made out of the fund to enable Division 293 tax to be paid for a member. [Schedule 3, Part 1, item 2, Division 133 of Schedule 1 to the TAA 1953]

5.41 In contrast, member benefits in accumulation interests are attributed to each member and a member's benefits can be reduced if a payment is made from the fund under a release authority used by the individual to release an amount from their superannuation to pay the liability for Division 293 tax.

5.42 A determination of tax deferred to a debt account sets out how much of the assessed tax is defined benefit tax that is deferred for later payment and debited to a debt account.

5.43 If the amount of deferred tax is later increased because of an amended assessment, a further determination will be made in respect of the increased amount included in the amended assessment. If the amount of assessed tax that has been deferred to the debt account is reduced as a result of an amended assessment, the Commissioner must make a determination in respect of this amount. The amount so determined - the reduction of the amount of tax deferred for later payment (deferral reversal) - must be credited to the relevant debt account. [Schedule 3, Part 1, item 2, sections 133-10, 133-25, 133-30, 133-60 and 133-70 of Schedule 1 to the TAA 1953]

5.44 The amount of the tax is deferred for payment with interest at the long term bond rate applied annually to the outstanding balance. The Commissioner may remit all or part of any interest payable under this provision if satisfied the special circumstances exist which make it fair and reasonable to do so. [Schedule 3, Part 1, item 2, sections 133-60 and 133-65 of Schedule 1 to the TAA 1953]

5.45 The amount of an individual's tax determined to be deferred to a debt account for an income year is so much of their assessed Division 293 tax for the income year that is attributable to their defined benefit superannuation interest (or interests) that is eligible for payment deferral (see below for the calculation method). [Schedule 3, Part 1, item 2, section 133-10 of Schedule 1 to the TAA 1953]

5.46 Defined benefit tax will not be eligible to be deferred to a debt account if at the time the determination is made:

•

a superannuation benefit (referred to as the end benefit) has become payable from the superannuation interest to which the defined benefit tax is attributable; or

•

a notice of debt account discharge liability has been made in relation to the superannuation interest to which the defined benefit tax is attributable.

[Schedule 3, Part 1, item 2, subsection 133-10(3) of Schedule 1 to the TAA 1953]

Determination of tax deferred to a debt account

5.47 The Commissioner must make a determination of tax deferred to a debt account as soon as practicable after making an assessment or amended assessment for Division 293 tax for an income year for which the individual has defined benefit tax. [Schedule 3, Part 1, item 2, subsection 133-10(1) of Schedule 1 to the TAA 1953]

5.48 However, the Commissioner will not issue a determination where no part of the Division 293 tax is defined benefit tax. [Schedule 3, Part 1, item 2, subsection 133-10(4) of Schedule 1 to the TAA 1953]

5.49 The Commissioner must keep a debt account for each superannuation interest where there is an amount of Division 293 tax that has been deferred to a debt account. [Schedule 3, Part 1, item 2, section 133-60 of Schedule 1 to the TAA 1953]

5.50 The determination includes information on the amount of Division 293 tax that has been deferred to a debt account for each superannuation interest. [Schedule 3, Part 1, item 2, subsections 133-10(1) and (2) of Schedule 1 to the TAA 1953]

5.51 The Commissioner must issue a notice of the determination as soon as practicable after the determination is made. Where the individual has defined benefit tax that is deferred to a debt account for two or more defined benefit interests in an income year, the Commissioner may include two or more determinations in the same notice. The Commissioner will generally issue the notice with the notice of assessment of the Division 293 tax amount. [Schedule 3, Part 1, item 2, section 133-30 of Schedule 1 to the TAA 1953]

5.52 Non-compliance by the Commissioner with the legislation does not prevent the determination from having valid effect. This ensures that there is administrative certainty for individuals if there are minor technical breaches in the issue of the determination or notice. [Schedule 3, Part 1, item 2, subsection 133-30(3) of Schedule 1 to the TAA 1953]

5.53 Individuals may object to the determination under Part IVC of the TAA 1953 if they are dissatisfied with a determination that has been made. Individuals may also object if the Commissioner makes an assessment of Division 293 tax and does not make a determination of defined benefit tax deferred to a debt account. This ensures that individuals who consider that the Commissioner should have treated some or all of their Division 293 tax as being deferred to a debt account have a right of review. [Schedule 3, Part 1, item 2, sections 133-25 and 133-30 of Schedule 1 to the TAA 1953]

5.54 The Commissioner has the power to vary or revoke the determination of tax deferred to a debt account. [Schedule 3, Part 1, item 2, note to subsections 133-10(1) and 133-25(2) of Schedule 1 to the TAA 1953]

Example 5.16 : A determination of tax deferred to a debt account

Paul only has a defined benefit superannuation interest. Paul has not been paid a benefit from his superannuation interest. For the 2019-20 income year the Commissioner makes an assessment of Division 293 tax. The Commissioner also makes a determination of tax deferred to a debt account. The determination specifies that all the Division 293 tax is defined benefit tax attributable to the defined benefit interest and all of the tax is deferred to a debt account.

How defined benefit tax is worked out

5.55 The amount of defined benefit tax is worked out according to the following formula.

Division 293 tax for the income year *[(Defined benefit contribution component)/(taxable contributions for the income year)]


5.56 Broadly, defined benefit tax is the proportion of an individual's total Division 293 tax as the individual's defined benefit contributions makes up of their total taxable contributions. [Schedule 3, Part 1, item 2, section 133-15 of Schedule 1 to the TAA 1953]

5.57 If the individual only has low tax contributions that are defined benefit contributions for a financial year, then all of the Division 293 tax for the corresponding income year will be defined benefit tax. If an individual has no defined benefit contributions for a financial year, then the individual will have no defined benefit tax for the corresponding income year.

5.58 However, in some cases not all of an individual's low tax contributions will be subject to Division 293 tax. This will occur where an individual only exceeds the $300,000 threshold due to their low tax contributions being added to their income.

5.59 In this situation, if the individual's low tax contributions include contributions to both defined benefit and accumulation interests, special rules are required to attribute tax between their superannuation interests. The amendments include special rules to ensure that the appropriate amount of tax is attributable to the accumulation interest and only the remaining amount of tax (if any) is determined to be deferred to a debt account.

5.60 This is achieved by the definition of the defined benefit contribution component in the formula set out above. The defined benefit contribution component in the formula is worked out as follows:

•

Step 1 - take the lesser of the individual's low tax contributions and their total defined benefit contributions; then

•

Step 2 - subtract from the result of step 1, the difference between the individual's taxable contributions and their low tax contributions.

[Schedule 3, Part 1, item 2, paragraph 133-15(1)(b) of Schedule 1 to the TAA 1953]

5.61 Additionally, in some cases where an individual has excess concessional contributions, an individual's low tax contributions will be less than zero if their defined benefit contributions are excluded. For example, this will occur if the individual has excess concessional contributions and only has defined benefit interests. A special rule is also required in this case as otherwise the normal formula would result in an individual's defined benefit tax exceeding their total Division 293 tax. In these cases, these amendments provide that all of the individual's Division 293 tax in that financial year will be defined benefit tax. This is also achieved by the application of the definition of defined benefit contribution component in the formula set out above. [Schedule 3, Part 1, item 2, subsections 133-15(1) and 133-15(2) of Schedule 1 to the TAA 1953]

Example 5.17 : Working out the amount of defined benefit tax - where no attribution is required between defined benefit interests and accumulation interests

John holds both a defined benefit interest and an accumulation interest. His concessional contributions made to his accumulation interest are $15,000 for the 2013 14 financial year.

John's defined benefit contributions for the purposes of Division 293 tax for the defined benefit interest are $25,000 for the 2013-14 financial year. His notional taxed contributions for the purposes of excess concessional contributions tax are also $25,000 for this interest.

His income for surcharge purposes (less reportable superannuation contributions) is $295,000.

John's excess concessional contributions are $15,000 (concessional contributions in excess of his cap, or $40,000 - $25,000) for the 2013-14 financial year.

John's low tax contributions are $25,000 for the 2013-14 financial year. His taxable contributions for the 2013-14 income year are $20,000 (the amount by which his low tax contributions for the financial year corresponding to the income year exceed the $300,000 threshold). John's assessed Division 293 tax is $3,000 - that is, 15 per cent of $20,000.

John's low tax contributions are equal to the amount of his defined benefit contributions, therefore all of his Division 293 tax is defined benefit tax. This is because his low tax contributed amounts for accumulation interests ($15,000) are equal to his excess concessional contributions (that is $15,000). Therefore only defined benefit contributions remain.

John's defined benefit tax is $3,000.

John has yet to receive any end benefit in relation to his defined benefit superannuation interest. As a result all of his defined benefit tax is eligible to be deferred to a debt account.

John will receive an assessment for Division 293 tax for $3,000. Of this amount, the Commissioner will make a determination of $3,000 defined benefit tax deferred to a debt account.

Example 5.18 : Working out the amount of defined benefit tax - where attribution is required between defined benefit interests and accumulation interests

Mary holds both a defined benefit interest and an accumulation interest. Her low tax contributed amounts for her accumulation interest are $15,000, and her defined benefit contributions for her defined benefit interest are $10,000 for the 2013-14 financial year. Her income for surcharge purposes (less reportable superannuation contributions) is $295,000 for the 2013-14 income year. Mary has no excess concessional contributions for the 2013-14 financial year.

Mary's low tax contributions are $25,000 for the 2013-14 financial year. Her taxable contributions for the 2013-14 income year are $20,000 (the amount by which her low tax contributions exceed the $300,000 threshold). Mary's assessed Division 293 tax is $3,000 - that is, 15 per cent of $20,000.

As Mary's low tax contributions includes both defined benefit contributions and low tax contributed amounts for the accumulation interest, Division 293 tax must be attributed between these interests.

Mary's defined benefit tax is 15 per cent of $5,000 ($750). The proportion of the Division 293 tax that is attributed to the defined benefit interest is calculated using the following formula:

Division 293 tax for the income year * [(Defined benefit contribution component) / (taxable contributions for the income year)]


Mary's total Division 293 tax liability for the financial year is $3,000 and her taxable contributions for the financial year are $20,000.

Her defined benefit contribution component is worked out using the following steps:

Step 1 - take the lesser of Mary's low tax contributions ($25,000) and total defined benefit contributions ($10,000) - $10,000

Step 2 - subtract the difference between Mary's low tax contributions ($25,000) and taxable contributions ($20,000) which is $5,000 ($10,000 - $5,000) = $5,000.

As a result, Mary's defined benefit contribution component is $5,000.

Mary's defined benefit tax for the financial year is therefore $750 $3,000 × ($5,000 / $20,000) = $750.

The effect of the calculation is that Mary's taxable contributions are attributed first to her accumulation interests, with the remaining part of the taxable contributions attributed to her defined benefit interest.

Mary has yet to receive any end benefit in relation to her defined benefit superannuation interest. As a result all of her defined benefit tax is eligible to be deferred to a debt account.

Mary will receive an assessment for Division 293 tax for $3,000. The Commissioner will make a determination that $750 of this amount is defined benefit tax deferred to a debt account for the defined benefit interest. The remainder of the assessed Division 293 tax of $2,250 is due and payable 21 days after the Commissioner gives the notice of assessment.

5.62 If an individual has multiple defined benefit interests to which the defined benefit tax is attributable, the defined benefit tax is attributed to each interest in the proportion that amount of defined benefit contributions for each interest bears to the total defined benefit contributions for all of those interests. Defined benefit tax needs to be attributed individually to each defined benefit interest because a separate debt account is maintained for each defined benefit interest and may be due and payable at different times. [Schedule 3, Part 1, item 2, sections 133-20 and 133-60 of Schedule 1 to the TAA 1953]

Example 5.19 : Attributing defined benefit tax to multiple defined benefit interests

Nick has two defined benefit interests, one in Fund A and one in Fund B. For the 2013-14 financial year the defined benefit contributions are $10,000 for the interest in Fund A and $15,000 for the interest in Fund B. Deferred payment of Division 293 tax applies to both interests. The Commissioner calculates Nick's taxable contributions to be $20,000, for the 2013-14 income year and his Division 293 tax is $3,000 ($20,000 × 15 per cent). The defined benefit tax attributed to the interest in Fund A is $1,200 ($10,000 / $25,000 × $3,000) and $1,800 for the interest in Fund B.

The Commissioner makes two determinations of defined benefit tax deferred to a debt account as deferred payment of the tax applies to both interests. The amount of assessed Division 293 tax that is deferred to a debt account for the interest in Fund A is $1,200, and for the interest in Fund B the amount is $1,800.

Nick will receive a notice of assessment for assessed Division 293 tax of $3,000. He will receive a determination of defined benefit tax deferred to a debt account of $1,200 for his interest in Fund A and a second determination of defined benefit tax deferred to a debt account of $1,800 for his interest in Fund B. No amount of Nick's assessed Division 293 tax is due and payable 21 days after the Commissioner gives the notice of assessment.

The Commissioner will keep debt accounts for defined benefit tax deferred to a debt account

5.63 The Commissioner must maintain a debt account for an individual for each superannuation interest they hold for which the Commissioner makes a determination of defined benefit tax deferred to a debt account. The Commissioner has power to vary or revoke the determination and make appropriate adjustments to a debt account kept by the Commissioner in relation to the superannuation interest. [Schedule 3, Part 1, item 2, section 133-60 of Schedule 1 to the TAA 1953]

5.64 The Commissioner will debit the debt account by the amount of:

•

defined benefit tax that is deferred to a debt account following a determination; and

•

interest.

5.65 The Commissioner will credit the account (if required) as a result of:

•

a determination by the Commissioner that an amount is a deferral reversal;

•

a remission of interest; or

•

a voluntary payment made by the individual to reduce the amount of the debt.

[Schedule 3, Part 1, item 2, sections 133-10, 133-25, 133-65 and 133-70 of Schedule 1 to the TAA 1953]

5.66 When the Commissioner starts to keep a debt account for deferred tax for a superannuation interest, the Commissioner must give the superannuation provider for that interest a notice that a debt account is kept for the individual. The superannuation provider then has to notify the Commissioner within 14 days of the earlier of:

•

an individual requesting payment of a benefit from the interest; or

•

a payment of a benefit being made.

5.67 The approved form requirements apply to allow the Commissioner to specify additional information that must be given by superannuation providers to the Commissioner when they notify the Commissioner of an individual's end benefit cap. These requirements also allow the Commissioner to extend the time period in which the information must be given to the Commissioner. This extension of time can be allowed to a superannuation provider upon request to the Commissioner, depending on their individual circumstances. [Schedule 3, Part 1, item 2, sections 133-75 and 133-140 of Schedule 1 to the TAA 1953]

5.68 Each debt account includes defined benefit tax for which the Commissioner makes a determination of tax deferred to a debt account until the end benefit is payable from the defined benefit interest. The debt account is debited with an amount of interest on the outstanding balance at the end of each financial year using the long term bond rate for that financial year. This ensures that the value of the balance of the debt account is maintained until eventual payment. [Schedule 3, Part 1, item 2, section 133-65 of the TAA 1953]

5.69 The Commissioner may remit part or all of the interest debited to the debt account concerning an amount of defined benefit tax if the amount of tax deferred to the debt account tax is later credited to the debt account as a result of a determination being varied or revoked, or a determination for a deferral reversal being made, where the Commissioner is satisfied it would be fair and reasonable to do so. [Schedule 3, Part 1, item 2, subsection 133-65(2) of Schedule 1 to the TAA 1953]

5.70 The Commissioner may also remit part or all of the interest debited to the debt account where he is satisfied that, because special circumstances exist, it would be fair and reasonable to do so. [Schedule 3, Part 1, item 3, subsection 133-65(3) of Schedule 1 to the TAA 1953]

Example 5.20 : Remission of interest

Paul receives a determination for defined benefit tax deferred to a debt account on 29 June. The Commissioner debits a debt account for Paul for the amount of the assessed Division 293 tax that has been deferred. Generally interest would be debited to the debt account on 30 June. However, it may not be fair and reasonable for the Commissioner to do so as Paul did not have adequate time to make a voluntary payment should he have desired before the interest is debited on 30 June. Hence the Commissioner might choose to remit the interest on the deferred amount debited on 29 June.

5.71 Individuals may make voluntary payments to reduce the outstanding balance of the debt account at any time. The Commissioner will credit the payment to the debt account and notify the individual of the new balance of the account. [Schedule 3, Part 1, item 2, section 133-70 of Schedule 1 to the TAA 1953]

When debt account discharge liabilities become due and payable

5.72 When an individual pays their debt account discharge liability, they discharge their liability for all of the amounts of assessed Division 293 tax that have been deferred to the debt account for that superannuation interest. [Schedule 3, Part 1, item 2, section 133-105 of Schedule 1 to the TAA 1953]

5.73 An individual is liable to pay their debt account discharge liability when an end benefit for that interest has become payable. [Schedule 3, Part 1, item 2, section 133-70 of Schedule 1 to the TAA 1953]

5.74 However, a special rule applies if the end benefit that becomes payable is a death benefit. In this case the individual becomes liable to pay their debt account discharge liability just before they die (with the liability then passing to the individual's estate under the general rules in sections 260-140 and 260-145 of Schedule 1 to the TAA 1953). [Schedule 3, Part 1, item 2, paragraph 133-105(2)(a) of Schedule 1 to the TAA 1953]

5.75 Payment of the end benefit for an interest also means that the defined benefit tax attributable to that interest is no longer eligible to be deferred to a debt account. Defined benefit tax attributable to an interest will also cease to be eligible for deferral where the individual is issued with a notice from the Commissioner stating the debt account discharge liability. This may occur before an end benefit becomes payable if the individual has notified the Commissioner of their request for the payment of an end benefit. [Schedule 3, Part 1, item 2, subsections 133-10(3) and 133-125(1) of Schedule 1 to the TAA 1953]

5.76 Generally, the debt account discharge liability is payable 21 days after the end benefit is paid in relation to a defined benefit superannuation interest for which the Commissioner keeps a debt account. [Schedule 3, Part 1, item 2, section 133-110 of Schedule 1 to the TAA 1953]

5.77 The liability for payment of the debt account discharge liability is not affected if another benefit is paid from the interest that is not the end benefit, after the end benefit becomes payable. For example, if a lump sum is paid in accordance with a release authority after the end benefit becomes payable but before the end benefit is paid, the due date for the debt account discharge liability will still be 21 days after the end benefit is paid.

5.78 When an individual requests a payment of a superannuation benefit (which is the end benefit) from their defined benefit interest for which the Commissioner keeps a debt account, they must notify the Commissioner in the approved form. This request for payment of the benefit will typically occur at retirement. [Schedule 3, Part 1, item 2, section 133-125 of Schedule 1 to the TAA 1953]

5.79 The notice must be given by the individual to the Commissioner within 21 days of making the request for payment of a superannuation benefit. [Schedule 3, Part 1, item 2, section 133-135 of Schedule 1 to the TAA 1953]

5.80 The superannuation provider is also required to notify the Commissioner using the approved form if they have received such a request from the individual to pay the benefit to the individual, or if the benefit becomes payable without receiving such a request. The superannuation provider is required to notify the Commissioner within 14 days of the earlier of these two events. [Schedule 3, Part 1, item 2, section 133-140 of Schedule 1 to the TAA 1953]

5.81 If the individual or superannuation provider becomes aware of any material change of information given in or omissions from the notice, they must advise the Commissioner of the change in the approved form, or give the omitted information to the Commissioner, and do so within seven days of the individual becoming aware of the change or omission. [Schedule 3, Part 1, item 2, section 133-145 of Schedule 1 to the TAA 1953]

5.82 Division 286 in Schedule 1 to the TAA 1953 imposes an administrative penalty for failing to give returns, statements, notices or other documents to the Commissioner on time and in the approved form. The penalty is equal to one penalty unit for each period of 28 days (or part) for which the document is overdue (up to a maximum of five penalty units). The administrative penalty for failing to lodge relevant taxation documents is imposed where:

•

the taxpayer is required under a taxation law to give a taxation document to the Commissioner by a particular day; and

•

the taxation document is not given to the Commissioner by that day or in the approved form.

5.83 The Commissioner must provide a notice to the individual specifying the amount of their debt account discharge liability. The Commissioner will issue the notice of the debt account discharge liability after either the individual or the superannuation provider has lodged the approved form notifying the Commissioner of the request to be paid a superannuation benefit or of an end benefit becoming payable. [Schedule 3, Part 1, item 2, section 133-125 of Schedule 1 to the TAA 1953]

5.84 After giving the notice to the individual, the Commissioner must also, as soon as practicable, give a release authority to the individual, to enable the individual to release an amount from their superannuation interest equal to the debt account discharge liability. The release authority is only given for the purpose of paying the amount of the debt account discharge liability specified in the notice. The release authority may only be given to the superannuation provider that holds the defined benefit interest for which the liability relates. [Schedule 3, Part 1, item 2, subsections 135-10(1) and 135-40(3) and table item 3 of subsection 135-10(2) of Schedule 1 to the TAA 1953]

5.85 However, in the situation where the individual that has the debt account dies and their liability passes to their estate, no release authority will be issued to the legal personal representative and the legal personal representative is not able to make use of a release authority issued to the deceased (as this must be exercised by the individual). Special rules apply to superannuation upon death and not all superannuation will necessarily go to the estate, so it would not be appropriate to provide a release authority in this situation. [Schedule 3, Part 1, item 2, subsections 135-10(5) and 135-75(1) of Schedule 1 to the TAA 1953]

5.86 There are limited circumstances in which a superannuation benefit can be paid from a defined benefit interest for which the Commissioner keeps a debt account without triggering liability to pay the debt account discharge liability for that interest. These include circumstances where the benefit payable is:

•

rolled over or transferred to a successor fund that is a complying superannuation fund;

•

paid due to satisfaction of a condition of release concerning severe financial hardship under the Superannuation Industry (Supervision) Regulations 1994 ;

•

paid due to satisfaction of a condition of release concerning compassionate grounds under the Superannuation Industry (Supervision) Regulations 1994 ; or

•

included in a legislative instrument made by a Treasury Minister as not triggering liability to pay the debt account discharge liability.

5.87 The first of these exceptions ensures that where an individual's benefits are rolled over or transferred under an arrangement where a different fund assumes the obligation to provide the same superannuation benefits as the original fund that liability to pay the debt account discharge liability is not triggered. However, this exception does not apply to a roll-over or transfer made in any other circumstances, such as where the individual requests the provider to roll-over their benefit to a different superannuation fund. [Schedule 3, Part 1, item 2, paragraph 133-130(1)(a) of Schedule 1 to the TAA 1953]

5.88 The second and third exceptions, for superannuation benefits paid due to severe financial hardship or on compassionate grounds, ensure that an individual is not required to pay a debt account discharge liability when they face serious financial hardship or other events that are recognised under the superannuation law as qualifying for compassionate consideration. [Schedule 3, Part 1, item 2, paragraphs 133-130(1)(b) and (c) of Schedule 1 to the TAA 1953]

5.89 The power for a Treasury Minister to specify, by legislative instrument, which benefits should not trigger liability to pay the debt account discharge liability provides flexibility to ensure that other payments of superannuation benefits not already excluded do not inappropriately trigger the liability to pay the debt. A legislative instrument made under this power may apply retrospectively from 1 July 2012, to align with the application date for the measure. This start date is generally to the benefit of taxpayers as it ensures that payments of superannuation benefits that would have triggered liability to pay the debt account discharge liability and remove eligibility to defer assessed Division 293 tax in future years do not do so. However, this provision is included for the avoidance of doubt to ensure that there is no uncertainty that these provision can apply from 1 July 2012. [Schedule 3, Part 1, item 2, paragraph 133-130(1)(d) and subsections 133-130(2) and (3) of Schedule 1 to the TAA 1953]

5.90 The amendments achieve the above outcome by defining end benefit as the first superannuation benefit payable from a superannuation interest other than roll-overs or transfers to successor funds, and benefits payable due to severe financial hardship or compassionate grounds, or benefits specified by a Treasury Minister in the legislative instrument. [Schedule 3, Part 1, item 2, subsection 133-130(1) of Schedule 1 to the TAA 1953]

5.91 The first superannuation benefit payable can be a superannuation lump sum or a superannuation income stream or a combination of both.

5.92 The end benefit generally becomes payable when the superannuation provider receives a request for payment of a benefit and the benefit is legally permitted to be paid by the superannuation provider. For a benefit to be payable by the superannuation provider it must meet a condition of release as set out in Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994 .

5.93 In some circumstances, a superannuation benefit may become payable without a request for payment. In those circumstances the benefit becomes payable when the superannuation provider is legally permitted to pay the benefit.

5.94 For example, the benefit could become payable by the superannuation provider without a request from the individual where the individual has died and a superannuation death benefit becomes payable.

5.95 The Commissioner must give a notice of the amount of debt account discharge liability for a defined benefit interest if the end benefit becomes payable or has been paid.

5.96 An individual has a debt account discharge liability and is liable to pay it if the Commissioner keeps a deferred tax debt account for the individual for a defined benefit interest and an end benefit has become payable. A release authority is also provided to the individual at this time to help pay the amount of their debt account discharge liability. [Schedule 3, Part 1, item 2, section 133-105 of Schedule 1 to the TAA 1953]

5.97 If an individual that has a debt account for deferred tax dies, the liability for debt account discharge liability does not arise at the time the end benefit becomes payable, but instead is taken to arise just before the deceased's death. The effect of this rule is to clarify that the individual is liable for the debt account discharge liability just before death, to ensure that the deceased's legal personal representative will be liable to pay the Division 293 tax from the deceased's estate. [Schedule 3, Part 1, item 2, paragraph 133-105(2)(b) and note 2 to paragraph 133-105(2)(b) of Schedule 1 to the TAA 1953]

5.98 After the end benefit becomes payable or a notice of the debt account discharge liability is issued in relation to a defined benefit interest, any assessments or amended assessments for Division 293 tax made by the Commissioner attributable to the defined benefit interest are payable within 21 days of the notice of assessment or amended assessment being given by the Commissioner as they are no longer eligible for a determination to be made for the tax to be deferred to a debt account. [Schedule 3, Part 1, items 1 and 2, sections 293-65 and 293-70 of the ITAA 1997 and subsection 133-10(3) of Schedule 1 to the TAA 1953]

5.99 Where the end benefit becomes payable or is paid for a superannuation interest to which deferred payment has applied (that is, a debt account is kept by the Commissioner for the interest) the Commissioner must:

•

give a notice of the debt account discharge liability; and

•

advise of the amount payable (see below).

[Schedule 3, Part 1, item 2, section 133-125 of Schedule 1 to the TAA 1953]

5.100 If the debt account discharge liability is not paid in full by the due and payable date it is subject to the general interest charge. [Schedule 3, Part 1, item 2, section 133-115 of Schedule 1 to the TAA 1953]

Amount of debt account discharge liability

5.101 An individual's debt account discharge liability for a superannuation interest is the lesser of:

•

the amount the debt account is in debit when the debt account discharge liability arises; and

•

the individual's end benefit cap for that superannuation interest.

[Schedule 3, Part 1, item 2, section 133-120 of Schedule 1 to the TAA 1953]

5.102 The end benefit cap is 15 per cent of the employer financed component of the value of the superannuation interest that accrued after 1 July 2012. [Schedule 3, Part 1, item 2, sections 133-120 and 133-140 of Schedule 1 to the TAA 1953]

5.103 The debt account discharge liability is, like assessed Division 293 tax, a tax-related liability for the purposes of the general tax administration by the Commissioner. Debt account discharge liabilities are included in the index of tax related liabilities in Schedule 1 to the TAA 1953. [Schedule 3, Part 2, item 20, table items 73 and 136A in subsection 250-10(2) of Schedule 1 to the TAA 1953]

5.104 An objection can be made concerning the notice of the debt account discharge liability under Part IVC of the TAA 1953. However, this objection may not relate to the amount of the liability except in relation to the application of the end benefit cap. Individuals are already entitled to object to assessments and determinations made by the Commissioner that result in assessed Division 293 tax and tax being deferred, and ultimately forming part of the debt account discharge liability. They are also entitled to have the amount of the defined benefit contributions and the end benefit cap reviewed by the Superannuation Complaints Tribunal. Providing a further right of objection in respect of these matters would, in effect, allow a further review of assessments and determinations made by the Commissioner many years after the period to object to such assessments and determinations has elapsed. In contrast, the administrative decision to apply the end benefit cap is not already subject to review. [Schedule 3, Part 1, item 2, subsection 133-125(4) of Schedule 1 to the TAA 1953]

End benefit cap

5.105 As the actual value of benefits received from a defined benefit interest can only be known with certainty when the benefit is paid, the annual assessment for Division 293 tax will be based on the defined benefit contributions which are determined with regard to the level of estimated final benefits. The actual benefit received from a defined benefit interest may be less than the level of estimated benefits on which the assessed Division 293 tax was based, sometimes significantly less. This means an individual may, in some cases, be liable for Division 293 tax despite receiving limited benefits.

5.106 To protect individuals with defined benefit interests from paying amounts of Division 293 tax on estimated employer contributions for benefits that are ultimately not payable, the debt account discharge liability is limited to 15 per cent of the employer financed component of the value of the benefit payable to the member that accrues after 1 July 2012. An individual's debt account discharge liability is the lesser of the amount by which their debt account is in debit or 15 per cent of the employer-financed component of that part of the value of the superannuation interest that accrued since 1 July 2012. [Schedule 3, Part 1, item 2, section 133-120 of Schedule 1 to the TAA 1953]

5.107 The value of the superannuation interest used to calculate the end benefit cap is worked out at the end of the financial year before the financial year in which the superannuation benefit becomes payable. [Schedule 3, Part 1, item 2, subsection 133-120(3) of Schedule 1 to the TAA 1953]

5.108 A separate end benefit cap applies to each defined benefit interest held by an individual for which there is a debit balance for a debt account maintained by the Commissioner. The Commissioner will determine if the end benefit cap as advised by the individual or the superannuation provider is lower than the debt account balance before the Commissioner issues the notice of the debt account discharge liability for an individual.

5.109 The Commissioner may request that a superannuation provider give a notice of the amount of the end benefit cap for a superannuation interest. The provider must give the notice in the approved form and within 14 days of the Commissioner making the request. This information gathering power enables the Commissioner to issue a notice of debt account discharge liability to an individual in a timely manner. The superannuation provider may also provide this information to the individual. [Schedule 3, Part 1, item 2, subsection 133-120(2) of Schedule 1 to the TAA 1953]

5.110 The approved form requirements allow the Commissioner to extend the time period in which the notice of the amount of the end benefit cap must be given to the Commissioner. This extension of time can be allowed to a superannuation provider upon request to the Commissioner, depending on their individual circumstances.

Example 5.21 : End benefit cap

John has a defined benefit interest for which the Commissioner keeps a debt account. John resigns in the 2015-16 income year and requests his entire superannuation benefit from the fund. This benefit is the end benefit as it is the first payment of a benefit from his interest. He notifies the Commissioner that he has requested payment of his benefit from his defined benefit interest. The payment of the benefit triggers the debt account discharge liability becoming due and payable. His debt account for the defined benefit interest maintained by the Commissioner has a debit balance of $10,000 at the date his end benefit is paid.

However, John receives a significantly lower resignation benefit from his defined benefit interest compared to the normal retirement benefit. The Commissioner requests the trustee of John's defined benefit interest to report the amount of his end benefit cap, based on the resignation benefit he actually received. The trustee works out the end benefit cap as 15 per cent of the amount of the employer financed component of the resignation benefit that accrued since 1 July 2012. The trustee advises the Commissioner that John's end benefit cap is $6,000.

The Commissioner issues a notice to John for his debt account discharge liability of $6,000 which is due and payable within 21 days.

Report by superannuation provider

5.111 A superannuation provider must notify the Commissioner if:

•

the Commissioner has notified the superannuation provider that a debt account is kept concerning the interest; and

•

either:

-

an individual requests that a superannuation benefit be paid from a superannuation interest that would be an end benefit; or

-

an end benefit becomes payable (whether or not a request has been made by the individual).

[Schedule 3, Part 1, item 2, section 133-140 of Schedule 1 to the TAA 1953]

5.112 The notice must be given in the approved form within 14 days of either the individual's request for the superannuation benefit, or the end benefit becoming payable, whichever is earlier. The notice must also set out the individual's end benefit cap and expected payment date. If there is a material change or omission in the information given in the notice, the correct or omitted information must be given within seven days of the provider becoming aware of the change or omission. [Schedule 3, Part 1, item 2, section 133-140 of Schedule 1 to the TAA 1953]

Paying the Division 293 tax

5.113 Division 293 tax may be paid from an individual's own money or from superannuation using a release authority. Special provisions allow individuals to give release authorities to their superannuation providers and set out certain conditions for the payment of the money.

5.114 However, where the deceased's legal personal representative is liable, the Division 293 tax must be paid from the deceased's estate. A release authority will not be issued to the legal personal representative. [Schedule 3, Part 1, item 2, subsection 135-10(5) of Schedule 1 to the TAA 1953]

5.115 An overview of the operation of release authorities and the circumstances in which they can be issued by the Commissioner and given by individuals is set out in the table below. Table 5.2 : Summary of types of release authority and their features

Overview of operation of release authorities

5.116 The amendments provide for release authorities to be issued by the Commissioner to individuals who have a liability under the measure. Release authorities are issued for liability for:

•

assessed Division 293 tax that is:

-

due and payable (liability concerning an accumulation superannuation interest);

-

deferred to a debt account (liability concerning a defined benefit superannuation interest for which the debt account discharge liability has not arisen); or

-

debt account discharge liability (liability concerning a defined benefit superannuation interest broadly for which a debt account is kept and the end benefit has become payable).

[Schedule 3, Part 1, item 2, section 135-10 of Schedule 1 to the TAA 1953]

5.117 Generally release authorities only authorise the release of an amount from an accumulation interest. This is because the structure of defined benefit schemes makes it difficult for these schemes to release amounts prior to the superannuation benefit becoming payable.

5.118 However, an exception applies where a debt account discharge liability arises. In these circumstances, defined benefit schemes will potentially be able to pay an amount under the release authority. This reflects that such a scheme must pay the superannuation benefit to the individual. [Schedule 3, Part 1, item 2, sections 135-40 and 135-90 of Schedule 1 to the TAA 1953]

Release authority for the payment of Division 293 tax - general provisions

5.119 Generally, individuals are prevented from withdrawing money from superannuation interests until they have reached preservation age and/or retired. However, where a superannuation provider is given a release authority by an individual that was issued by the Commissioner following the assessment of Division 293 tax, the individual can withdraw an amount from their superannuation for the purpose of paying Division 293 tax.

5.120 The amendments provide a framework that applies to the Commissioner, individuals and superannuation providers concerning the issue and giving of release authorities issued for the payment of Division 293 tax. [Schedule 3, Part 1, item 2, Division 135 of Schedule 1 to the TAA 1953]

5.121 The Commissioner must issue individuals with a release authority to allow payment of Division 293 tax liabilities (but not a debt account discharge liability) using money from any of their superannuation interests other than a defined benefit interest. Individuals do not have to use the release authority. [Schedule 3, Part 1, item 2, Subdivision 135-A of Schedule 1 to the TAA 1953]

The Commissioner

5.122 As soon as practicable after making an assessment of Division 293 tax or an amended assessment resulting in additional Division 293 tax being payable, the Commissioner must issue a release authority to the individual. This release authority enables the individual to have an amount released from a superannuation interest (other than a defined benefit interest) to pay all or some of the amount of their Division 293 tax liabilities. A more detailed explanation is provided below for each type of release authority. [Schedule 3, Part 1, item 2, table items 1 and 2 of subsection 135-10(1) of Schedule 1 to the TAA 1953]

5.123 However, the Commissioner is not required to issue a release authority for a nil amount. This recognises that a document with a nil amount would not serve any useful purpose. [Schedule 3, Part 1, item 2, subsection 135-10(2)]

5.124 The release authority issued by the Commissioner must:

•

state the amount of the release entitlement (the maximum amount of money that the release authority authorises to be released by a superannuation provider);

•

be dated; and

•

contain any other information the Commissioner considers relevant.

[Schedule 3, Part 1, item 2, subsection 135-10(3) of Schedule 1 to the TAA 1953]

5.125 Consistent with subsection 33(3) of the Acts Interpretation Act 1901 , the Commissioner may re-issue or vary this release authority. [Schedule 3, Part 1, item 2, note to subsection 135-10(4) of Schedule 1 to the TAA 1953]

5.126 The Commissioner also has the power to issue a further release authority. The Commissioner may issue a further release authority to the individual at any other time if satisfied it is reasonable to do so. This may include when the individual requests a further release authority from the Commissioner because the required 120 day period to provide the release authority has expired and there are circumstances that prevented the individual giving the release authority to a superannuation provider. Examples of such circumstances include where the individual was overseas or if the release authority has been lost. [Schedule 3, Part 1, item 2, subsection 135-10(4) of Schedule 1 to the TAA 1953]

5.127 The further release authority will be issued in the same way as the original release authority. The individual can give the further release authority to the superannuation provider within 120 days of it being issued. The further release authority may not exceed the amount of the release entitlement. [Schedule 3, Part 1, item 2, subsection 135-10(4) of Schedule 1 to the TAA 1953]

5.128 To ensure individuals are not advantaged or disadvantaged where amounts are paid under the multiple release authorities, only the release entitlement (listed on the original release authority) is taken into account in working out the amount of non-assessable non-exempt income. [Schedule 3, Part 2, item 10, sections 303-20 and 304-20 of the ITAA 1997]

5.129 The Commissioner may give a copy of a release authority issued to an individual concerning an assessment or amended assessment (other than for a debt account discharge liability) directly to one or more superannuation providers that hold an accumulation interest for the individual. The copy of the release authority can be given by the Commissioner, if at the end of 120 days after the date of the release authority:

•

the individual has not paid the full amount of their assessed Division 293 tax that is due and payable; and

•

the Commissioner reasonably believes:

-

the individual has not given the release authority to a superannuation provider;

-

the amount(s) paid by a superannuation provider(s) falls short of the amount of assessed Division 293 tax that is due and payable; or

-

the superannuation providers that were given the release authority by the individual are unable to release the full amount of the unpaid liability as insufficient money is available for release in the superannuation interests.

[Schedule 3, Part 1, item 2, section 135-45 and note to subsection 135-54(1) of Schedule 1 to the TAA 1953]

5.130 Allowing the Commissioner to directly obtain money from a superannuation provider gives the Commissioner an additional mechanism to enforce payment of outstanding liability for assessed Division 293 tax that is due and payable.

5.131 The Commissioner may specify, in writing, that a lower amount be released under the release authority than the issued amount. This ensures that where part of the liability has been paid, the Commissioner does not collect more funds from the superannuation provider than are needed to meet the outstanding liability. [Schedule 3, Part 1, item 2, subsection 135-45(2) of Schedule 1 to the TAA 1953]

5.132 If a release authority was given by the Commissioner directly to the superannuation provider, the payment must be made by the provider to the Commissioner. The Commissioner must, as soon as possible, give the individual written notice that the payment has been made. This ensures that individuals are informed about amounts being released from their superannuation interests. [Schedule 3, Part 1, item 2, subsection 135-90(4) of Schedule 1 to the TAA 1953]

The individual

5.133 Individuals can choose to withdraw an amount equal to all, or part, of their assessed Division 293 tax from superannuation interests (other than a defined benefit interest). If an individual decides to have funds released they must provide the release authority or a copy of the release authority to the superannuation provider. They must request in writing the amount for which the release authority was issued or a lower amount to be released. Alternatively individuals may choose to pay all or part of the assessed amount from non-superannuation monies, including from their after tax income. [Schedule 3, Part 1, item 2, section 135-40 of Schedule 1 to the TAA 1953]

5.134 An individual has 120 days from the date of the release authority to decide whether to seek a release of an amount from their superannuation interests. This time period ensures that there is sufficient time to consider the decision to provide the release authority, whilst ensuring that the time period provided is not unlimited. Individuals may give the release authority to more than one superannuation provider by providing copies of the release authority. Individuals may choose to do this if, for example, one superannuation interest does not contain sufficient money. [Schedule 3, Part 1, item 2, section 135-40 of Schedule 1 to the TAA 1953]

5.135 Payments under a release authority cannot be made from defined benefit interests, with the exception of a release authority issued for debt account discharge liability. An individual can only give a release authority issued for debt account discharge liability to the provider that holds the defined benefit interest to which the debt relates. This reflects that there will generally be sufficient funds held in such a defined benefit interest at the time the end benefit is paid, given that the end benefit cap (see above) limits liability to 15 per cent of the employer financed component of the value of the superannuation interest that accrued from 1 July 2012. [Schedule 3, Part 1, item 2, subsections 135-40(3), 135-75(4) and 136-185(1) and section 135-90 of Schedule 1 to the TAA 1953]

5.136 Individuals are subject to both an administrative penalty and taxation consequences if they have amounts released from superannuation interests which exceed the amount of the release entitlement. If the superannuation provider does not comply with a release authority by releasing an amount in excess of the amount required to be released, an administrative penalty of 20 penalty units applies.

5.137 Payments made to the Commissioner in relation to release authorities are taken to be made in satisfaction of the current or anticipated tax debt of the individual for the purposes of the running balance account rules of the TAA 1953. This ensures that amounts are allocated appropriately by the Commissioner. [Schedule 3, Part 1, item 2, section 135-90 of Schedule 1 to the TAA 1953]

5.138 The Commissioner treats voluntary payments under a release authority for assessed Division 293 tax that has been deferred to a debt account as made for the purpose of reducing the debt account that interest. This ensures that the Commissioner credits the relevant debt account with the payment received. [Schedule 3, Part 1, item 2, subsection 135-90(2) of Schedule 1 to the TAA 1953]

5.139 Where the superannuation provider makes a payment authorised by a release authority the payment is a superannuation benefit. The proportioning rule does not apply to the payment made. Therefore, the superannuation provider is not required to calculate either the tax-free component or the taxable component of the superannuation benefit when they release an amount of money in accordance with the release authority. [Schedule 3, Part 1, item 2, section 135-100 of Schedule 1 to the TAA 1953]

The superannuation provider

5.140 Superannuation providers that are given a release authority for payment from an interest (other than a defined benefit interest) must pay the amount within 30 days of receiving the release authority. This ensures that amounts are paid within a reasonable period, whilst ensuring that superannuation providers have sufficient time to facilitate payments. Release authorities that must be actioned by superannuation providers are those which are issued to allow a payment in respect of:

•

an original or amended assessment of Division 293 tax;

•

the amount of a determination or amended determination of defined benefit tax deferred to a debt account; or

•

the amount of debt account discharge liability.

[Schedule 3, Part 1, item 2, section 135-75 of Schedule 1 to the TAA 1953]

5.141 For integrity purposes, payments under a release authority generally must be made to the Commissioner. However, individuals may direct their superannuation provider to release money to themselves where the release authority is issued in relation to an assessment or an amended assessment to the extent it is payable within 21 days.

5.142 This recognises that such assessments are due and payable within 21 days, whilst superannuation providers have 30 days to action a release authority they receive. Accordingly, individuals may choose in these circumstances to pay the Division 293 tax liability from other sources by the due and payable date and separately obtain the amount from the superannuation fund to compensate for this payment. [Schedule 3, Part 1, item 2, subsections 135-75(2) and (3) of Schedule 1 to the TAA 1953]

5.143 It is expected that most taxpayers will choose to pay the Division 293 tax liability from other sources rather than using a release authority to access a payment from their superannuation interest, based on the Commissioner's experience about the way that most taxpayers with liabilities for excess contributions tax have chosen to pay those liabilities.

5.144 However, where a taxpayer gives a release authority to their superannuation provider to release money to pay their Division 293 tax liability, but the payment is not received by the Commissioner by the due date because the fund released the payment after the due date, it is expected that the Commissioner will take the timing of this payment into account in determining whether any general interest charge should be remitted.

5.145 If the release authority is given for an amount of assessed Division 293 tax that is deferred to a debt account or a debt account discharge liability, the payment may only be made to the Commissioner. If the release authority is given by the Commissioner to the provider, the payment must be made to the Commissioner. [Schedule 3, Part 1, item 2, section 135-75 of Schedule 1 to the TAA 1953]

5.146 Where an individual or the Commissioner has sought that a superannuation provider pay a liability (by providing a release authority) using the individual's superannuation monies and the superannuation provider has acted on that authority, the superannuation provider must supply information to the Commissioner. The Commissioner must be given a statement in the approved form within 30 days of the amount being paid from the individual's interest. The approved form must include details of the release authority provided by the individual or the Commissioner to the superannuation provider. This reporting requirement exists also where the superannuation provider has paid the amount to the Commissioner rather than to the individual. This reporting requirement ensures that the Commissioner is advised by the superannuation provider that the release authority has been complied with. [Schedule 3, Part 1, item 2, note 3 in subsection 135-75(3) of Schedule 1 to the TAA 1953 and Part 2, item 36, paragraph 390-65(1)(a) of Schedule 1 to the TAA 1953]

5.147 The approved form may require the statement to contain, among other things:

•

details of the amount paid on behalf of or to the individual;

•

information about the superannuation provider; and

•

information about the individual who provided the release authority to the superannuation provider.

5.148 If the superannuation provider does not comply with a release authority to the extent funds are available, an administrative penalty of 20 penalty units applies for failure to pay the amount on time. [Schedule 3, Part 1, item 2, note 1 in subsection 135-75(3) of Schedule 1 to the TAA 1953 and Part 2, item 27, subsection 288-95(4) of Schedule 1 to the TAA 1953]

5.149 A superannuation provider that makes a payment under a release authority must pay the lesser of the following amounts:

•

the amount the release authority was issued for;

•

a lower amount specified, by the individual or the Commissioner, in the release authority; or

•

the total amount of all the superannuation lump sums of all the superannuation interests held by the superannuation provider for the person (this recognises that an amount cannot be paid to the extent it exceeds the sum held).

[Schedule 3, Part 1, item 2, section 135-85 of Schedule 1 to the TAA 1953]

5.150 The payment for a release authority can be made out of one or more superannuation interests held by the superannuation provider for the individual. In most cases such a payment can only be made out of an accumulation interest. This is because a superannuation provider may only make a payment from a defined benefit interest under a release authority issued for a debt account discharge liability for the defined benefit interest to which the debt account relates. Therefore, if a Division 293 tax liability arises in relation to a defined benefit interest, until the debt account discharge liability arises, an individual will need to hold a separate accumulation interest to be able to use the release authority. [Schedule 3, Part 1, item 2, subsection 135 75(4) and section 135-95 of Schedule 1 to the TAA 1953]

5.151 The Government intends to amend that the Superannuation Industry (Supervision) Regulations 1994 and the Retirement Savings Account Regulations 1997 so that where a release authority is given to a superannuation provider after it has commenced paying a superannuation income stream, the superannuation provider may to commute some or all of the income stream to a lump sum in order to comply with the release authority, subject to the rules of the superannuation plan.

Paying assessed Division 293 tax that is due and payable

5.152 A release authority is issued in relation to assessed Division 293 tax or additional assessed Division 293 tax that is due and payable 21 days after the notice of assessment or amended assessment is given. [Schedule 3, Part 1, item 2, subsection 135-10(1) of Schedule 1 to the TAA 1953]

5.153 Individuals receive an assessment for each year they have Division 293 tax. Amounts that remain unpaid after that time attract the general interest charge for each day an unpaid amount remains outstanding. [Schedule 3, Part 1, item 2, sections 293-65, 293-70 and 293-75 of the ITAA 1997]

5.154 Individuals may choose how they pay the amount of their assessed Division 293 tax that is due and payable. Payments can be made from their superannuation monies using the release authority provided (other than from defined benefit interests) or from other sources, such as after-tax income, or from a combination of both.

Example 5.22 : Paying your assessed Division 293 tax due and payable

The Commissioner makes an assessment for Mark for 2012-13 for an assessed Division 293 tax amount of $2,000. As there is no deferred payment determination the entire amount is due and payable within 21 days of the date of the notice of assessment. Mark is also issued with a release authority for $2,000.

Mark pays the assessed amount of $2,000 from his after tax income before the due and payable date. Mark has 120 days before the release authority expires to decide whether to give the release authority to his superannuation provider for the amount to be paid to him.

Example 5.23 : Paying your assessed Division 293 tax due and payable - use of release authority

Mark is a member and a trustee of his self-managed superannuation fund. The Commissioner makes an assessment for Mark for 2012-13 for an assessed Division 293 tax amount of $2,000. As there is no deferred payment determination the entire amount is due and payable within 21 days of the date of the notice of assessment. Mark is also issued with a release authority for $2,000.

Mark indicates in writing on the release authority that $1,000 is to be released from his interest in the SMSF directly to the Commissioner. As trustee of the SMSF, he arranges for the amount to be paid from his interest to the Commissioner before the due and payable date and provides a release authority statement to the Commissioner. Mark pays the balance of the assessment of $1,000 to the Commissioner from his after tax income.

Making voluntary payments to reduce a debt account - defined benefit interests

5.155 Individuals do not have to pay the amount of their assessed Division 293 tax that is deferred to a debt account within 21 days from the notice of assessment. The deferred tax is debited to the debt account the Commissioner keeps for an individual's defined benefit superannuation interest. However, individuals may make voluntary payments to reduce the balance of their debt account at any time. Payments can be made from superannuation monies (other than from a defined benefit interest) using a release authority issued for the amount of the deferred tax or from other sources. If a debt account is extinguished before the end of the financial year because an individual pays the outstanding balance, no interest applies for that financial year. [Schedule 3, Part 1, item 2, sections 133-10, 133-65 and 133-70 of Schedule 1 to the TAA 1953]

5.156 After making a determination of defined benefit tax deferred to a debt account (in relation to an assessment or amended assessment), the Commissioner must, as soon as practicable, give a release authority to the individual. The release authority issued for a determination of defined benefit tax deferred to a debt account may be used by an individual to assist with payment of so much of the assessed (or additional assessed) tax that is stated in the determination to be deferred to a debt account. [Schedule 3, Part 1, item 2, item 2 in the table in subsection 135-10(2) of Schedule 1 to the TAA 1953]

5.157 If an individual makes a payment to the Commissioner to reduce the amount of their debt account, the Commissioner must:

•

acknowledge receipt of the payment to the individual;

•

credit the payment to the debt account at the time of receipt; and

•

notify the individual of the revised balance of the debt account.

[Schedule 3, Part 1, item 2, section 133-70 of Schedule 1 to the TAA 1953]

Paying debt account discharge liabilities - defined benefit interests

5.158 The debt account discharge liability for an interest is payable 21 days after the day when the end benefit for that interest is paid. [Schedule 3, Part 1, item 2, sections 133-110 and 133-130 of Schedule 1 to the TAA 1953]

5.159 When an individual pays their debt account discharge liability for a superannuation interest, the individual discharges their liability for their assessed Division 293 tax that has been deferred to the debt account for that superannuation interest for all income years. [Schedule 3, Part 1, item 2, subsection 133-105(3) of Schedule 1 to the TAA 1953]

5.160 Individuals have the option to choose how they pay their debt account discharge liability:

•

with monies from their defined benefit superannuation interest to which the debt account relates, using a release authority issued by the Commissioner;

•

from other sources, such as after-tax income; or

•

a combination of both.

5.161 The individual may only give the release authority for a debt account discharge liability to the superannuation provider that holds the defined benefit interest to which the liability relates. [Schedule 3, Part 1, item 2, subsection 135-40(3) of Schedule 1 to the TAA 1953]

5.162 Where the individual has a debt account discharge liability, they may wish to give the release authority to the superannuation provider to have the amount of the liability paid directly to the Commissioner. The amount paid under the release authority is non-assessable non-exempt income of the individual and the proportioning rule does not apply to the amount paid. [Schedule 3, Part 1, item 2, section 135-100 of Schedule 1 to the TAA 1953 and Part 2, items 9 and 10, sections 10-5, 11-55, 303-20 and 304-20 of the ITAA 1997]

Example 5.24 : Paying debt account discharge liability

The Commissioner issues a notice to Mark for a $20,000 debt account discharge liability for his defined benefit interest. The amount is due and payable 21 days from the date of the payment of the end benefit. The Commissioner also gives a release authority to Mark. Mark can only give the release authority to the provider holding the defined benefit interest to which the debt relates.

Mark gives the release authority to the superannuation provider requesting that the amount of $20,000 be paid from his interest. This amount is paid directly to the Commissioner before the due and payable date.

Income tax treatment of payments under release authorities

Non-assessable non-exempt payments

5.163 Where funds are released in accordance with a release authority, including from a defined benefit interest to which a debt account discharge liability relates, the funds released to an individual (in the case of assessed Division 293 tax payable within 21 days) or paid to the Commissioner for the individual are non-assessable non-exempt income to the extent that the amounts released do not exceed the amount of the release entitlement as stated on the release authority issued by the Commissioner. [Schedule 3, Part 2, item 9, section 303-20 of the ITAA 1997]

5.164 If the fund rules that apply in relation to the defined benefit interest do not allow a lump sum superannuation benefit to be paid (for example where the only benefit payable from the interest is a non-commutable superannuation income stream benefit), then no amount can be paid by the superannuation provider. Individuals should notify the Commissioner as early as possible after requesting a superannuation benefit to enable a release authority to be provided by the Commissioner and funds to be released prior to or at the same time as the payment of the requested superannuation benefit. Funds released under a release authority and paid to the Commissioner are non-assessable, non-exempt income and the proportioning rule does not apply. [Schedule 3, Part 2, item 9, section 303-20 of the ITAA 1997]

5.165 In contrast if the superannuation benefit is first paid to the individual as a lump sum and they organise to pay the Commissioner from these funds, they may be liable to income tax on the amount released to them under the taxation rules that apply to superannuation benefit payments. This can be avoided by the individual by ensuring the amount of the debt account discharge liability is paid to the Commissioner from the fund by using a release authority before the any of the benefit is paid to the individual.

Treatment of excess payments from release authorities

5.166 If payments made in relation to a release authority are in excess of the amount of the release entitlement stated on the release authority, the excess amount is assessable income of the individual. This ensures that individuals who, for example, provide multiples copies of a release authority to different superannuation providers and the total amount released from superannuation is in excess of the amount of the release entitlement stated on the release authority then they are liable to income tax at their marginal tax rate on the excess amount. If the Commissioner issues a further release authority then the excess amount included in the individual's assessable income is the amount released from superannuation that is in excess of the issued amount of the original release authority only. [Schedule 3, Part 1, item 2, section 135-10 of Schedule 1 to the TAA 1953 and Part 2, item 9, section 304-20 of the ITAA 1997]

5.167 In addition, individuals are liable to an administrative penalty of 20 penalty units if the total amount released from superannuation exceeds the amount of the release entitlement stated on the release authority by the Commissioner. This is also intended to discourage individuals seeking to withdraw amounts from superannuation in excess of the amount which is authorised and therefore preserves the integrity of the superannuation system. [Schedule 3, Part 2, item 29, section 288-100 of Schedule 1 to the TAA 1953]

Interest charge

Shortfall interest charge

5.168 Shortfall interest charge applies where an amount of Division 293 tax becomes due and payable as a result of an amended assessment for an income year. [Schedule 3, Part 2, item 23, section 280-102B of Schedule 1 to the TAA 1953]

5.169 Shortfall interest charge applies to the amount of an assessment for each day from the date that the first assessment of Division 293 tax was payable and ending on the day the amended notice of assessment was given by the Commissioner. [Schedule 3, Part 2, item 23, subsection 280-102B(3) and section 280-105 of Schedule 1 to the TAA 1953]

5.170 Where an amended assessment reduces a liability and a later amended assessment reinstates all or part of that liability, shortfall interest charge applies to the amount that is reinstated, from the due and payable date of the earlier amended assessment. [Schedule 3, Part 2, item 23, subsection 280-102B(4) of Schedule 1 to the TAA 1953]

5.171 Shortfall interest charge does not apply to an amount of Division 293 tax arising as a result of an amended assessment that is deferred to a debt account. This is because the amount has not become due and payable. [Schedule 3, Part 2, item 23, subsection 280-102B(2) of Schedule 1 to the TAA 1953]

5.172 The Commissioner must give an individual a notice stating the amount of the shortfall interest charge liability. This amount can be included in another notice that the Commissioner gives to the individual such as the notice of the amended assessment. The notice serves as prima facie evidence of the shortfall interest charge liability.

Remission of shortfall interest charge

5.173 An individual can seek to have shortfall interest charge that has been imposed remitted in whole or part. The Commissioner has established guidelines setting out factors to be taken into account in deciding if shortfall interest charge should be remitted. [Schedule 3, Part 2, item 25, subsection 280-110(1) of Schedule 1 to the TAA 1953]

5.174 An individual may object to a remission decision by the Commissioner. Where an unremitted amount of shortfall interest charge exceeds 20 per cent of the tax shortfall, the objection, review and appeal rights in Part IVC of the TAA 1953 are available to the individual. The rights include a right to object to the merits of a decision made by the Commissioner, a right to have the Administrative Appeals Tribunal review the objection decision and a right to appeal the decision to the Federal Court. [Schedule 3, Part 2, item 26, section 280-170 of Schedule 1 to the TAA 1953]

General interest charge

Assessed Division 293 tax unpaid by the due and payable date

5.175 Assessed Division 293 tax that is not deferred to a debt account is due and payable 21 days after the notice of assessment or amended assessment is given to an individual by the Commissioner. General interest charge applies to an amount of assessed Division 293 tax, shortfall interest charge or general interest charge for each day they remain unpaid. The Commissioner may remit the general interest charge under the existing remission guidelines. General interest charge is calculated in accordance with Part IIA of the TAA 1953. [Schedule 3, Part 1, item 1, section 293-75 of the ITAA 1997]

5.176 Shortfall interest charge is due and payable 21 days after the day on which the Commissioner gives the individual notice of the charge. Shortfall interest charge is calculated in accordance with the general rules in Division 280 in Schedule 1 to the TAA 1953. [Schedule 3, Part 1, item 1, note 2 and note 3 in section 293-75 of the ITAA 1997]

Debt account discharge liabilities unpaid by the due and payable date

5.177 Debt account discharge liabilities are payable 21 days after the day when the end benefit for the relevant interest is paid. Amounts that remain unpaid after that time attract general interest charge for each day they are unpaid. The Commissioner may remit the general interest charge under existing remission guidelines. The general interest charge is calculated in accordance with Part IIA of the TAA 1953. [Schedule 3, Part 1, item 2, section 133-115 of Schedule 1 to the TAA 1953]

Other amendments

Tax deductibility of payments

5.178 The amendments ensure that payments of Division 293 tax are not deductible for income tax purposes. [Schedule 3, Part 2, item 8, section 26-100 of the ITAA 1997]

Compensation for acquisition of property

5.179 The amendments address the situation where the release of money under a release authority to allow payment of Division 293 tax, tax deferred to a debt account or a debt account discharge liability would interfere with a person's property rights in a way that contravenes section 51(xxxi) of the Constitution. If such a breach occurs so that the Commonwealth has acquired property from an entity otherwise than on just terms, then reasonable compensation must be paid by the Commonwealth to the entity. [Schedule 3, Part 1, item 2, subsection 135-90(1) of Schedule 1 to the TAA 1953]

5.180 The provision confers jurisdiction on a court of competent jurisdiction to determine the compensation that might be necessary to ensure that the acquisition of property by the Commonwealth has occurred on just terms. [Schedule 3, Part 1, item 2, subsection 135-80 of Schedule 1 to the TAA 1953]

Evidence and power to obtain information

5.181 The framework for the evidentiary effect of official tax documents in Division 350 in Schedule 1 to the TAA 1953 is extended to Division 293 tax. [Schedule 3, Part 2, item 30, paragraph 350(5)(c) of Schedule 1 to the TAA 1953]

5.182 The rules that protect the confidentiality of taxpayer information and allow the Commissioner to access premises and gather information for other indirect tax laws is also extended to the Division 293 tax. [Schedule 3, Part 2, item 31, subparagraph 353-10(1)(a)(iia), item 32, subparagraphs 353-10(1)(b)(iia) and (c)(iia), item 33, section 353-15, and item 34, subsection 353-15(1) of Schedule 1 to the TAA 1953]