Income Tax Assessment (1997 Act) Regulations 2021

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-30 - SUPERANNUATION  

Division 295 - Taxation of superannuation entities  

Subdivision 295-D - Contributions excluded  

SECTION 295-265.03   HOW TO CALCULATE THE DISCOUNTED PRESENT VALUE OF LIABILITIES FOR STEP 1 OF METHOD 1  

295-265.03(1)    
This section sets out how to calculate the discounted present value of liabilities for step 1 of method 1 in section 295-265.02 .

295-265.03(2)    
The basis for the calculation in step 1 of method 1 must be the actuarial valuation basis relevant to the income year in question which the superannuation provider ' s actuary would consider appropriate for a valuation under Part 9 of the SIS Regulations.

295-265.03(3)    
In making the calculation, exclude the following liabilities that are not provided from taxable contributions:

(a)    liabilities representing benefits financed by undeducted contributions (within the meaning of subsection 27A(1) of the Income Tax Assessment Act 1936 as in force just before 15 March 2007);

(b)    liabilities representing benefits or components that are expected to be treated as paid from an untaxed source;

Example:

Pensions provided on an emerging cost or pay as you go basis, with corresponding elections being made under subsection 295-180(1) of the Act.

(c)    liabilities for entitlements relating to membership and for which corresponding assets can be identified;

Example:

Fully funded productivity, superannuation guarantee or salary sacrifice account balances.

(d)    liabilities representing death and disability benefits for which costs are claimed as deductible under section 295-465 or 295-470 of the Act.

295-265.03(4)    
Apportion the discounted present value of the liabilities, between:

(a)    the period of superannuation fund membership completed before 1 July 1988; and

(b)    the period of superannuation fund membership completed on and after 1 July 1988;

for each superannuation fund member or former member for whom a liability is being valued.

295-265.03(5)    
The apportionment must be made having regard to the following requirements and principles:

(a)    superannuation fund membership must be consistent with the definition used by the fund to determine the benefit being valued;

(b)    an alternative method for apportioning the discounted present value of liabilities may be used only if the superannuation provider ' s actuary certifies that the method will provide a reasonable approximation of the apportionment;

(c)    a linear apportionment method will generally be used, but an apportionment method that reflects non-linear accrual of entitlements may be used if the superannuation provider ' s actuary considers that such a method achieves an outcome that is consistent with the principle that funding credits can only be used against contributions intended to provide for entitlements relating to membership completed before 1 July 1988.