295-390 Income from other assets used to meet current pension liabilities

(1) A proportion of the *ordinary income and *statutory income of a *complying superannuation fund that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).

Exception

(2) Subsection (1) does not apply to:

(a) *non-arm’s length income; or

(b) amounts included in assessable income under Subdivision 295-C; or

(c) income *derived from *segregated non-current assets; or

(d) income that is exempt from income tax under section 295-385.

Formula

(3) The proportion is:

Average value of current pension liabilities / Average value of superannuation liabilities

where:

average value of current pension liabilities is the average value for the income year of the fund’s current liabilities (contingent or not) in respect of *superannuation income stream benefits that are payable by the fund in that year. This does not include liabilities for which *segregated current pension assets are held.

average value of superannuation liabilities is the average value for the income year of the fund’s current and future liabilities (contingent or not) in respect of *superannuation income stream benefits in respect of which contributions have, or were liable to have, been made. This does not include liabilities for which *segregated current pension assets or *segregated non-current assets are held.

Actuary’s certificate

(4) The value of particular liabilities of the fund at a particular time is the amount of the fund’s assets, together with future contributions in respect of the benefits concerned and expected earnings on the assets and contributions after that time, that would provide the amount required to discharge those liabilities as they fall due. This must be specified in an *actuary’s certificate obtained by the trustee of the fund before the date for lodgment of the fund’s *income tax return for the income year.

(5) The expected earnings are worked out at the rate the actuary expects will be the rate of the fund’s earnings on its assets (except *segregated current pension assets or *segregated non-current assets).

Superannuation liabilities where no current certificate

(6) The superannuation liabilities do not have to be valued by an actuary for the income year if the fund has no *segregated current pension assets or *segregated non-current assets for the income year. Instead, the value can be worked out using this formula:

(Last value of superannuation liabilities / Last value of assets) x Current value of assets

where:

current value of assets is the value of all of the fund’s assets at a time in the income year, as specified in an *actuary’s certificate obtained by the trustee of the fund before the date for lodgment of the fund’s *income tax return for the income year.

last value of assets is the most recent value of all of the fund’s assets specified in an *actuary’s certificate.

last value of superannuation liabilities is the value, at the time of that most recent valuation, of the fund’s superannuation liabilities specified in an *actuary’s certificate.

Note: This allows a fund to avoid the expense of an actuarial valuation of its superannuation liabilities, except in those years that a valuation is required by the SIS Act in order for the fund to continue to be complying.

(7) Subsections (4), (5) and (6) do not apply in working out the amounts to be used in the formula in subsection (3) if, at all times during the income year, the liabilities of the fund in respect of *superannuation income stream benefits payable at those times were liabilities in respect of superannuation income stream benefits that are prescribed by the regulations for the purposes of this subsection.

295-395 Meaning of segregated non-current assets

(1) Assets of a *complying superannuation fund are segregated non-current assets at a time in an income year if:

(a) the assets are invested, held in reserve or otherwise dealt with at that time solely to enable the fund to discharge all or part of its current and future liabilities (contingent or not) to pay benefits in respect of which contributions have, or were liable to have, been made; and

(b) the trustee of the fund obtains an *actuary’s certificate before the date for lodgment of the fund’s *income tax return for the income year to the effect that the amount of the assets, together with any future contributions, and the earnings that the actuary expects will be made from them will provide the amount required to discharge in full those liabilities, or that part of those liabilities, as they fall due.

(2) The liabilities referred to in paragraph (1)(a) do not include liabilities (contingent or not) in respect of *superannuation income stream benefits payable by the fund at that time.

295-400 Income of a PST attributable to current pension liabilities

(1) This proportion of the *ordinary income and *statutory income that would otherwise be assessable income of a *pooled superannuation trust is *exempt income:

Average number of units in the trust during the income year that are segregated current pension assets of unitholders that are complaying superannuation funds / Average number of units in the trust during the income year

Exceptions

(2) Subsection (1) does not apply to:

(a) *non-arm’s length income; or

(b) amounts included in assessable income under item 1 of the table in section 295-320.

Alternative exemption

(3) However, the trustee of the *pooled superannuation trust can choose that a different amount be *exempt income of the trust under this section if a percentage of the assessable income of the trust would have been exempt income under section 295-385 or 295-390 if it had been *derived instead by the unitholders in the trust in proportion to their holdings.

(4) That percentage of the trust’s *ordinary income and *statutory income is then *exempt income.

295-405 Other exempt income

The *ordinary income or *statutory income of an entity is exempt from income tax as set out in this table.

Note: For an explanation of the acronyms used, see section 295-35.

295-410 Amount credited to RSA

For item 3 of the table in section 295-405, the part of the amount credited to the *RSA that is *exempt income is worked out by:

(a) multiplying the amount by the number of days in the income year for which the pension (within the meaning of the Retirement Savings Accounts Act 1997) was paid; and

(b) dividing the result by the number of days in the income year that the RSA existed.

Subdivision 295-G - Deductions

Table of sections

Death or disability benefits

295-460 Benefits for which deductions are available

295-465 Complying funds - deductions for insurance premiums

295-470 Complying funds - deductions for future liability to pay benefits

295-475 RSA providers - deductions for insurance premiums

295-480 Meaning of whole of life policy and endowment policy

Increased amount of superannuation lump sum death benefits

295-485 Deductions for increased amount of superannuation lump sum death benefit

Other deductions

295-490 Other deductions

Certain amounts cannot be deducted

295-495 Amounts that cannot be deducted

Death or disability benefits

295-460 Benefits for which deductions are available

Sections 295-465 (about deductions for complying funds for insurance premiums), 295-470 (about deductions for complying funds for future liability to pay benefits) and 295-475 (about deductions for *RSA providers for insurance premiums) apply to these benefits:

(a) a *superannuation death benefit;

(b) a *disability superannuation benefit;

(c) a benefit consisting of an amount payable to a person under an income stream because of the person’s temporary inability to perform normal employment duties, that is payable for no longer than:

(i) 2 years; or

(ii) if an approval under section 62 of the Superannuation Industry (Supervision) Act 1993 is in force for benefits of that kind and the approval specifies a longer maximum period - that longer period; or

(iii) if there is no such approval in force - a longer period allowed by the Commissioner.

Note 1: The fund can deduct amounts in relation to these benefits under either section 295-465 or 295-470, but not both.

Note 2: The taxable component of the superannuation lump sums will contain an element untaxed in the fund: see section 307-290.

295-465 Complying funds - deductions for insurance premiums

(1) A *complying superannuation fund can deduct the proportions specified in this table of premiums it pays for insurance policies that are (wholly or partly) for current or contingent liabilities of the fund to provide benefits referred to in section 295-460 for its members. It can deduct the amounts for the income year in which the premiums are paid.

Note: If the fund receives a rebate or refund of an insurance premium, the amount may be included in its assessable income: see table item 4 in section 295-320.

(2) A *complying superannuation fund can also deduct the amount it could reasonably be expected to pay in an *arm’s length transaction to obtain an insurance policy to cover it for that part of its current or contingent liabilities to provide benefits referred to in section 295-460 for which it does not have insurance coverage. It can deduct the amount for the income year when it has the liability.

Actuary’s certificate

(3) The trustee must obtain an *actuary’s certificate before the date for lodgment of the fund’s *income tax return for the income year in order to deduct an amount referred to in item 6 of the table or in subsection (2).

Choice not to deduct amounts under this section

(4) The trustee may choose not to deduct amounts under this section for an income year and to deduct instead (under section 295-470) amounts based on the fund’s future liability to pay the benefits.

(5) The choice applies also to future income years unless the Commissioner decides that it should not.

295-470 Complying funds - deductions for future liability to pay benefits

(1) A *complying superannuation fund can deduct an amount under this section for an income year if:

(a) the trustee of the fund makes a choice under subsection 295-465(4) and the choice applies to the income year; and

(b) the trustee pays:

(i) a benefit referred to in paragraph 295-460(a) or (b) for the income year in consequence of the termination of a member’s employment; or

(ii) a benefit referred to in paragraph 295-460(c).

(2) The amount the fund can deduct is:

Benefit amount x (Future service days / Total service days)

where:

benefit amount is:

(a) for a benefit that is a *superannuation lump sum - the amount of the lump sum; or

(b) for a benefit that is a *superannuation income stream - the *value of the *superannuation interest supporting the income stream; or

(c) for a benefit referred to in paragraph 295-460(c) - the total of the amounts paid during the income year.

future service days is the number of days in the period starting when:

(a) the termination happened; or

(b) for a benefit referred to in paragraph 295-460(c) - the member became unable to perform normal work duties;

and ending on the member’s *last retirement day.

total service days is the sum of future service days and the number of days in:

(a) for a benefit that is a *superannuation lump sum - the *service period for the superannuation lump sum; or

(b) for another benefit - the period ending on the first day of the period to which the first payment of the benefit relates and starting on the earliest of:

(i) the day on which the member joined the relevant *superannuation fund; and

(ii) the first day of the period of employment to which the benefit relates (including a qualifying period before the member could join the fund and any period when the member was not a member of the fund); and

(iii) the day applicable under subsection (3).

(3) The applicable day is the first day of the *service period for a *superannuation lump sum that is a *roll-over superannuation benefit if all or part of the *value of the other benefit is attributable to the roll-over superannuation benefit.

295-475 RSA providers - deductions for insurance premiums

An *RSA provider can deduct premiums it pays for insurance policies that are wholly for its liability to provide benefits referred to in section 295-460 for its *RSA holders. It can deduct the amounts for the income year in which the premiums are paid.

Note: If the RSA provider receives a rebate or refundof an insurance premium, the amount may be included in its assessable income: see table item 5 in section 295-320.

295-480 Meaning of whole of life policy and endowment policy

(1) A whole of life policy is an insurance policy:

(a) that includes an investment component; and

(b) the premiums for which are not dissected; and

(c) where the sum insured (and any bonuses) are payable on:

(i) the death of the individual insured; or

(ii) the earlier of the death of the individual insured and the individual attaining the age specified in the policy (being at least the age of 85).

(2) An endowment policy is an insurance policy:

(a) that includes an investment component; and

(b) the premiums for which are not dissected; and

(c) where the sum insured (and any bonuses) are payable on:

(i) a day specified in, or worked out under, the policy; or

(ii) the death of the individual insured if that happens before that day;

but does not include a *whole of life policy.

Increased amount of superannuation lump sum death benefits

295-485 Deductions for increased amount of superannuation lump sum death benefit

(1) An entity that is a *complying superannuation fund, or a *complying approved deposit fund, and has been since 1 July 1988 (or since it came into existence if that was later) can deduct an amount under this section if:

(a) it pays a *superannuation lump sum because of the death of a person to the trustee of the deceased’s estate or an individual who was a *spouse, former spouse or child of the deceased at the time of death or payment; and

(b) it increases the lump sum by an amount, or does not reduce the lump sum by an amount (the tax saving amount ) so that the amount of the lump sum is the amount that the fund could have paid if no tax were payable on amounts included in assessable income under Subdivision 295-C.

(2) The fund can deduct the amount in the income year in which the lump sum is paid.

(3) The amount the fund can deduct is:

Tax saving amount / Low tax component rate

where:

low tax component tax rate is the rate of tax imposed on the *low tax component of the fund’s taxable income for the income year.

Note: The deduction is designed to compensate the fund for the tax payable on the contributions that are used to fund the lump sum.

(4) The amount the fund can deduct for a *superannuation lump sum paid because of the death of a person to the trustee of the deceased’s estate is so much of the subsection (3) amount as is appropriate having regard to the extent to which individuals referred to in paragraph (1)(a) can reasonably be expected to benefit from the estate.

Other deductions

295-490 Other deductions

(1) An entity can deduct amounts as set out in this table.

Note: For an explanation of the acronyms used, see section 295-35.

(2) A fund cannot deduct an amount under item 3 of the table for a levy imposed by regulations under section 6 of the Superannuation (Financial Assistance Funding) Levy Act 1993 to the extent that:

(a) the levy is remitted; or

(b) there is a refund or other applicationof an overpayment of the levy.

(3) No other provision of this Act affects a fund’s income tax liability in relation to the levy.

Certain amounts cannot be deducted

295-495 Amounts that cannot be deducted

These entities cannot deduct anything for these amounts:

Note: For an explanation of the acronyms used, see section 295-35.

Subdivision 295-H - Components of taxable income

Table of sections

295-545 Components of taxable income - complying superannuation funds, complying ADFs and PSTs

295-550 Meaning of non-arm’s length income

295-555 Components of taxable income - RSA providers

295-545 Components of taxable income - complying superannuation funds, complying ADFs and PSTs

(1) The taxable income of these entities is split into a *non-arm’s length component and a *low tax component:

(a) *complying superannuation funds;

(b) *complying approved deposit funds;

(c) *pooled superannuation trusts.

Note: A concessional rate applies to the low tax component, while the non-arm’s length component is taxed at the highest marginal rate. The rates are set out in the Income Tax Rates Act 1986.

(2) The non-arm’s length component for an income year is the entity’s *non-arm’s length income for that year less any deductions to the extent that they are attributable to that income.

(3) The low tax component is any remaining part of the entity’s taxable income for the income year.

295-550 Meaning of non-arm’s length income

(1) An amount of *ordinary income or *statutory income is non-arm’s length income of a *complying superannuation fund, a *complying approved deposit fund or a *pooled superannuation trust (other than an amount to which subsection (2) applies or an amount *derived by the entity in the capacity of beneficiary of a trust) if:

(a) it is derived from a *scheme the parties to which were not dealing with each other at *arm’s length in relation to the scheme; and

(b) that amount is more than the amount that the entity might have been expected to derive if those parties had been dealing with each other at arm’s length in relation to the scheme.

(2) An amount of *ordinary income or *statutory income is also non-arm’s length income of the entity if it is:

(a) a *dividend paid to the entity by a *private company; or

(b) ordinary income or statutory income that is reasonably attributable to such a dividend;

unless the amount is consistent with an *arm’s length dealing.

(3) In deciding whether an amount is consistent with an *arm’s length dealing under subsection (2), have regard to:

(a) the value of *shares in the company that are assets of the entity; and

(b) the cost to the entity of the shares on which the *dividend was paid; and

(c) the rate of that dividend; and

(d) whether the company has paid a dividend on other shares in the company and, if so, the rate of that dividend; and

(e) whether the company has issued any shares to the entity in satisfaction of a dividend paid by the company (or part of it) and, if so, the circumstances of the issue; and

(f) any other relevant matters.

(4) Income *derived by the entity as a beneficiary of a trust, other than because of holding a fixed entitlement to the income, is non-arm’s length income of the entity.

(5) Other income *derived by the entity as a beneficiary of a trust through holding a fixed entitlement to the income of the trust is non-arm’s length income of the entity if:

(a) the entity acquired the entitlement under a *scheme, or the income was derived under a scheme, the parties to which were not dealing with each other at *arm’s length; and

(b) the amount of the income is more than the amount that the entity might have been expected to derive if those parties had been dealing with each other at arm’s length.

(6) This section:

(a) applies to a *non-share equity interest in the same way as it applies to a *share; and

(b) applies to an *equity holder in a company in the same way as it applies to a shareholder in the company; and

(c) applies to a *non-share dividend in the same way as it applies to a *dividend.

295-555 Components of taxable income - RSA providers

(1) The taxable income of an *RSA provider is split into an *RSA component and a *standard component.

Note: The RSA component is taxed at the same concessional rate that applies to the low tax component of complying superannuation funds, complying approved deposit funds and pooled superannuation trusts. The standard component is taxed at the standard company rate.

(2) The RSA component for an income year is worked out in this way:

Method statement

Step 1. Add these amounts included in the provider’s assessable income for the income year:

(a) amounts included under Subdivision 295-C; and

(b) other amounts credited during the year to *RSAs that it provides.

Step 2. Subtract from the step 1 amount amounts paid from those *RSAs (except benefits for the RSA holders or tax).

Step 3. The result is the RSA component .

(3) However, if the amount worked out under subsection (2) is more than the *RSA provider’s taxable income:

(a) the provider’s taxable income is equal to the *RSA component; and

(b) this Act applies to the provider as if it had a *tax loss for the income year of an amount that would have been that loss if the RSA component were not *ordinary income or *statutory income.

(4) The standard component is any remaining part of the *RSA’s taxable income for the income year.

Subdivision 295-I - No-TFN contributions

Table of sections

295-605 Liability for tax on no-TFN contributions income

295-610 No-TFN contributions income

295-615 Meaning of quoted (for superannuation purposes)

295-620 No reduction under Subdivision 295-D

295-625 Assessments

295-605 Liability for tax on no-TFN contributions income

(1) A *superannuation provider in relation to a *complying superannuation fund is liable to pay tax on the *no-TFN contributions income of the fund for an income year.

(2) A *superannuation provider in relation to a *non-complying superannuation fund is liable to pay tax on the *no-TFN contributions income of the fund for an income year.

(3) An *RSA provider is liable to pay tax on its *no-TFN contributions income for an income year.

Note 1: The tax is imposed by the Income Tax Act 1986.

Note 2: The no-TFN contributions income is subject to a special rate of tax under the Income Tax Rates Act 1986.

Note 3: The Commissioner may make an assessment of the amount of income tax on the no-TFN contributions income: see section 169 of the Income Tax Assessment Act 1936.

295-610 No-TFN contributions income

(1) An amount included by Subdivision 295-C in the assessable income of a *complying superannuation fund, a *non-complying superannuation fund or an *RSA provider for an income year is no-TFN contributions income for the year if:

(a) it is included by that Subdivision in the assessable income of the income year of the fund or RSA provider in which 1 July 2007 occurs, or a later income year; and

(b) it is a contribution made to the fund or *RSA on or after 1 July 2007 to provide *superannuation benefits for an individual; and

(c) by the end of the income year, the individual has not *quoted (for superannuation purposes) his or her *tax file number to the *superannuation provider.

Exception

(2) However, an amount is not no-TFN contributions income if:

(a) the contribution was made in relation to a *superannuation interest or an *RSA of the individual that existed prior to 1 July 2007; and

(b) the total contributions made in relation to the superannuation interest or RSA for the income year that are included in assessable income under Subdivision 295-C did not exceed $1,000.

295-615 Meaning of quoted (for superannuation purposes)

An individual has quoted (for superannuation purposes) a *tax file number to an entity at a time if the individual:

(a) quotes his or her tax file number to the entity at that time; or

(b) is taken by the Superannuation Industry (Supervision) Act 1993, the Retirement Savings Accounts Act 1997 or this Act to quote his or her tax file number to the entity at that time;

in connection with the operation or the possible future operation of one or more of the following Acts:

(c) the Superannuation Acts (within the meaning of Part 25A of the Superannuation Industry (Supervision) Act 1993);

(d) the Retirement Savings Accounts Act 1997.

295-620 No reduction under Subdivision 295-D

There is no reduction of the amount of *no-TFN contributions income by Subdivision 295-D.

Note: Subdivision 295-D can reduce an amount that would otherwise be included in assessable income. It does not reduce the amount of no-TFN contributions income. An amount is still no-TFN contributions income even if, because of Subdivision 295-D, the amount (or part of it) is not included in assessable income.

295-625 Assessments

(1) If the Commissioner makes an assessment of the amount of income tax on the *no-TFN contributions income, notice of the assessment may be included in a notice of any other assessment under this Act.

Self-assessment

(2) If the conditions in subsection (3) are met, the Commissioner is taken to have made an assessment of a kind set out in subsection (4).

(3) The conditions are:

(a) one of the following gives the Commissioner an *income tax return for an income year on a particular day (the return day ):

(i) a *superannuation provider in relation to a *complying superannuation fund;

(ii) a superannuation provider in relation to a *non-complying superannuation fund;

(iii) an *RSA provider; and

(b) the return is the first income tax return given by the provider for the year; and

(c) the Commissioner has not already made an assessment of a kind set out in subsection (4) for the provider for the year.

(4) The assessment is taken to have been made for the provider for the income year on the return day, and to be an assessment, in accordance with the information stated in the return, of the amount of income tax payable on the *no-TFN contributions income (if any) of the provider (or to be an assessment that no tax is payable).

(5) The return is taken to be notice of the assessment signed by the Commissioner and given to the provider on the return day.

Note: The return may also be taken to be a notice of another assessment: see section 166A of the Income Tax Assessment Act 1936.

Subdivision 295-J - Tax offset for no-TFN contributions income (TFN quoted within 4 years)

Table of sections

295-675 Entitlement to a tax offset

295-680 Amount of the tax offset

295-675 Entitlement to a tax offset

(1) A *superannuation provider in relation to a *superannuation fund or an *RSA provider is entitled to a *tax offset for an income year (the current year ) commencing on or after 1 July 2007 for amounts of tax that count towards the offset for the provider for the current year.

(2) An amount of tax counts towards the offset for the provider for the current year if:

(a) the tax was payable by the provider in one of the most recent 3 income years ending before the current year; and

(b) the tax was payable on an amount of *no-TFN contributions income of the fund or *RSA provider; and

(c) the amount of no-TFN contributions income was a contribution made to the fund or provider to provide *superannuation benefits for an individual who, in the current year, has *quoted (for superannuation purposes) his or her *tax file number to the provider for the first time.

Note: In certain circumstances the superannuation provider or RSA provider can get a refund of the tax offset under Division 67.

295-680 Amount of the tax offset

The amount of the *tax offset is the sum of each amount of tax that counts towards the offset for the provider for the current year.

Division 301 - Superannuation member benefits paid from complying plans etc.

Table of Subdivisions

Guide to Division 301

301-A Application

301-B Member benefits: general rules

301-C Member benefits: elements untaxed in fund

301-D Departing Australia superannuation payments

301-E Superannuation lump sum member benefits less than $200

Guide to Division 301

301-1 What this Division is about

This Division sets out the tax treatment of superannuation benefits received by members of complying plans etc. This treatment varies depending on the age of the member when they receive the benefit. This Division also sets out the tax treatment of departing Australia superannuation payments and certain payments less than $200.

Subdivision 301-A - Application

Table of sections

301-5 Division applies to superannuation member benefits paid from complying plans etc.

301-5 Division applies to superannuation member benefits paid from complying plans etc.

This Division applies to:

(a) *superannuation member benefits that are paid from a *complying superannuation plan; and

(b) *superannuation guarantee payments; and

(c) *small superannuation account payments; and

(d) *unclaimed money payments; and

(e) *superannuation co-contribution benefit payments; and

(f) *superannuation annuity payments.

Note: For the tax treatment of superannuation death benefits paid from complying plans, see Division 302. Superannuation benefits paid from superannuation plans that are not complying superannuation plans are dealt with in Division 305.

Subdivision 301-B - Member benefits: general rules

Table of sections

Member benefits - recipient aged 60 or above

301-10 All superannuation benefits are tax free

Member benefits - recipient aged over preservation age and under 60

301-15 Tax free status of tax free component

301-20 Superannuation lump sum - taxable component taxed at 0% up to low rate cap amount, 15% on remainder

301-25 Superannuation income stream - taxable component attracts 15% offset

Member benefits - recipient aged under preservation age

301-30 Tax free status of tax free component

301-35 Superannuation lump sum - taxable component taxed at 20%

301-40 Superannuation income stream - taxable component is assessable income, 15% offset for disability benefit

Member benefits - recipient aged 60 or above

301-10 All superannuation benefits are tax free

If you are 60 years or over when you receive a *superannuation benefit, the benefit is not assessable income and is not *exempt income.

Note 1: Your superannuation benefit may be a superannuation lump sum or a superannuation income stream benefit: see sections 307-65 and 307-70.

Note 2: If your superannuation benefit includes an element untaxed in the fund, see Subdivision 301-C.

Member benefits - recipient aged over preservation age and under 60

301-15 Tax free status of tax free component

If you are under 60 years but have reached your *preservation age when you receive a *superannuation benefit, the *tax free component of the benefit is not assessable income and is not *exempt income.

Note 1: Your superannuation benefit may be a superannuation lump sum or a superannuation income stream benefit: see sections 307-65 and 307-70).

Note 2: For tax free component , see Subdivision 307-C.

301-20 Superannuation lump sum - taxable component taxed at 0% up to low rate cap amount, 15% on remainder

(1) If you are under 60 years but have reached your *preservation age when you receive a *superannuation lump sum, the *taxable component of the lump sum is assessable income.

Note 1: For taxable component , see Subdivision 307-C.

Note 2: If your lump sum includes an element untaxed in the fund, see Subdivision 301-C.

(2) You are entitled to a *tax offset that ensures that the rate of income tax on the amount mentioned in subsection (3) does not exceed 0%.

(3) The amount is so much of the total of the *taxable components included in your assessable income for the income year under subsection (1) as does not exceed your *low rate cap amount (see section 307-345) for the income year.

(4) You are entitled to a *tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 15%.

(5) The amount is so much of the total of the *taxable components included in your assessable income for an income year under subsection (1) as exceeds your *low rate cap amount for the income year.

Note: This amount will be nil if the total of the taxable components falls short of your low rate cap amount for the income year.

301-25 Superannuation income stream - taxable component attracts 15% offset

(1) If you are under 60 years but have reached your *preservation age when you receive a *superannuation income stream benefit, the *taxable component of the benefit is assessable income.

(2) You are entitled to a *tax offset equal to 15% of the *taxable component of the benefit.

Note 1: For taxable component , see Subdivision 307-C.

Note 2: If your superannuation income stream benefit includes an element untaxed in the fund, see Subdivision 301-C.

Member benefits - recipient aged under preservation age

301-30 Tax free status of tax free component

If you are under your *preservation age when you receive a *superannuation benefit, the *tax free component of the benefit is not assessable income and is not *exempt income.

Note 1: Your superannuation benefit may be a superannuation lump sum or a superannuation income stream benefit: see sections 307-65 and 307-70.

Note 2: For tax free component , see Subdivision 307-C.

301-35 Superannuation lump sum - taxable component taxed at 20%

(1) If you are under your *preservation age when you receive a *superannuation lump sum, the *taxable component of the lump sum is assessable income.

Note: For taxable component , see Subdivision 307-C.

(2) You are entitled to a *tax offset that ensures that the rate of income tax on the *taxable component of the lump sum does not exceed 20%.

Note: If your lump sum includes an element untaxed in the fund, see Subdivision 301-C.

301-40 Superannuation income stream - taxable component is assessable income, 15% offset for disability benefit

(1) If you are under your *preservation age when you receive a *superannuation income stream benefit, the *taxable component of the benefit is assessable income.

Note: For taxable component , see Subdivision 307-C.

Offset for disability benefit

(2) If the benefit is a *superannuation income stream benefit and a *disability superannuation benefit, you are entitled to a *tax offset equal to 15% of the *taxable component of the benefit.

Subdivision 301-C - Member benefits: elements untaxed in fund

Table of sections

301-90 Tax free component and element taxed in fund dealt with under Subdivision 301-B, but element untaxed in the fund dealt with under this Subdivision

Member benefits (element untaxed in fund) - recipient aged 60 or above

301-95 Superannuation lump sum - element untaxed in fund taxed at 15% up to untaxed plan cap amount, top rate on remainder

301-100 Superannuation income stream - element untaxed in fund attracts 10% offset

Member benefits (element untaxed in fund) - recipient aged over preservation age and under 60

301-105 Superannuation lump sum - element untaxed in fund taxed at 15% up to low rate cap amount, 30% up to untaxed plan cap amount, top rate on remainder

301-110 Superannuation income stream - element untaxed in fund is assessable income

Member benefits (element untaxed in fund) - recipient aged under preservation age

301-115 Superannuation lump sum - element untaxed in fund taxed at 30% up to untaxed plan cap amount, top rate on remainder

301-120 Superannuation income stream - element untaxed in fund is assessable income

301-90 Tax free component and element taxed in fund dealt with under Subdivision 301-B, but element untaxed in the fund dealt with under this Subdivision

If you receive a *superannuation benefit that includes an *element untaxed in the fund:

(a) the *tax free component (if any) of the benefit is treated in the same way as the tax free component of a superannuation benefit under Subdivision 301-B; and

(b) the *element taxed in the fund (if any) included in the benefit is treated in the same way as the taxable component of a superannuation benefit under Subdivision 301-B; and

(c) the element untaxed in the fund is treated in accordance with this Subdivision.

Member benefits (element untaxed in fund) - recipient aged 60 or above

301-95 Superannuation lump sum - element untaxed in fund taxed at 15% up to untaxed plan cap amount, top rate on remainder

(1) If you are 60 years or over when you receive a *superannuation lump sum from a *superannuation plan, the *element untaxed in the fund of the lump sum is assessable income.

(2) You are entitled to a *tax offset that ensures that the rate of income tax on the amount mentioned in subsection (3) does not exceed 15%.

Note: The remainder of the element untaxed in the fund is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

(3) The amount is so much of the *element untaxed in the fund as does not exceed your *untaxed plan cap amount for the *superannuation plan at the time you receive the benefit.

301-100 Superannuation income stream - element untaxed in fund attracts 10% offset

(1) If you are 60 years or over when you receive a *superannuation income stream benefit, the *element untaxed in the fund of the benefit is assessable income.

(2) You are entitled to a *tax offset equal to 10% of the *element untaxed in the fund of the benefit.

Member benefits (element untaxed in fund) - recipient aged over preservation age and under 60

301-105 Superannuation lump sum - element untaxed in fund taxed at 15% up to low rate cap amount, 30% up to untaxed plan cap amount, top rate on remainder

(1) If you are under 60 years but have reached your *preservation age when you receive a *superannuation lump sum from a *superannuation plan, the *element untaxed in the fund of the lump sum is assessable income.

(2) You are entitled to a *tax offset that ensures that the rate of income tax on the amount worked out under subsection (3) does not exceed 30%.

(3) The amount is so much of the *element untaxed in the fund as does not exceed your *untaxed plan cap amount for the *superannuation plan at the time you receive the benefit.

Note: To the extent that the element untaxed in the fund exceeds the amount worked out under this subsection, it is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

(4) If you are entitled to one or more *tax offsets under subsection (2) for *superannuation benefits that you receive in an income year, you are entitled to a tax offset that ensures that the rate of income tax on the amount worked out under subsection (5) does not exceed 15%.

(5) The amount is so much of the total of the one or more amounts worked out under subsection (3) as does not exceed your *low rate cap amount for the income year.

(6) If you are also entitled to a *tax offset under subsection 301-20(2) for the income year, reduce your *low rate cap amount for the purposes of subsection (5) of this section for the income year by the amount mentioned in subsection 301-20(3).

301-110 Superannuation income stream - element untaxed in fund is assessable income

If you are under 60 years but have reached your *preservation age when you receive a *superannuation income stream benefit, the *element untaxed in the fund of the benefit is assessable income.

Member benefits (element untaxed in fund) - recipient aged under preservation age

301-115 Superannuation lump sum - element untaxed in fund taxed at 30% up to untaxed plan cap amount, top rate on remainder

(1) If you are under your *preservation age when you receive a *superannuation lump sum from a *superannuation plan, the *element untaxed in the fund of the lump sum is assessable income.

(2) You are entitled to a *tax offset that ensures that the rate of income tax on the amount mentioned in subsection (3) does not exceed 30%.

Note: The remainder of the element untaxed in the fund is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

(3) The amount is so much of the *element untaxed in the fund as does not exceed your *untaxed plan cap amount for the *superannuation plan at the time you receive the benefit.

301-120 Superannuation income stream - element untaxed in fund is assessable income

If you are under your *preservation age when you receive a *superannuation income stream benefit, the *element untaxed in the fund of the benefit is assessable income.

Subdivision 301-D - Departing Australia superannuation payments

Table of sections

301-170 Departing Australia superannuation payments

301-175 Treatment of departing Australia superannuation benefits

301-170 Departing Australia superannuation payments

A departing Australia superannuation payment is a *superannuation lump sum that:

(a) is paid to a person who has departed Australia; and

(b) is paid:

(i) in accordance with regulations under the Superannuation Industry (Supervision) Act 1993 or the Retirement Savings Accounts Act 1997 that are specified in regulations made for the purposes of this definition; or

(ii) in accordance with section 67A of the Small Superannuation Accounts Act 1995; or

(iii) by an exempt public sector superannuation scheme (within the meaning of section 10 of the Superannuation Industry (Supervision) Act 1993) and is made in accordance with rules of the fund that are substantially similar to the regulations specified as mentioned in subparagraph (i).

301-175 Treatment of departing Australia superannuation benefits

(1) Despite anything else in this Division, if you receive a *superannuation benefit that is a *departing Australia superannuation payment, the benefit is not assessable income and is not *exempt income.

(2) However, you are liable to pay income tax on that payment at the rate declared by the Parliament in respect of *departing Australia superannuation payments.

Note 1: The tax is imposed in the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 and the amount of the tax is set out in that Act.

Note 2: See the Taxation Administration Act 1953 for provisions dealing with the payment of the tax.

Subdivision 301-E - Superannuation lump sum member benefits less than $200

Table of sections

301-225 Superannuation lump sum member benefits less than $200 are tax free

301-225 Superannuation lump sum member benefits less than $200 are tax free

Despite anything else in this Division (apart from Subdivision 301-D), a *superannuation member benefit that you receive is not assessable income and is not *exempt income if:

(a) the benefit is a *superannuation lump sum; and

(b) the amount of the benefit is less than $200; and

(c) the *value of the *superannuation interest from which the benefit is paid is nil just after the benefit is paid; and

(d) the requirements (if any) specified in the regulations in relation to the benefit are satisfied.

Division 302 - Superannuation death benefits paid from complying plans etc.

Table of Subdivisions

Guide to Division 302

302-A Application

302-B Death benefits to dependant

302-C Death benefits to non-dependant

302-D Definitions relating to dependants

Guide to Division 302

302-1 What this Division is about

This Division sets out the tax treatment of superannuation death benefits received by members of complying plans etc. This treatment varies depending on the age of the deceased when they died (and in some cases on the age of the recipient of the benefit).

Subdivision 302-A - Application

Table of sections

302-5 Division applies to superannuation death benefits paid from complying plans etc.

302-10 Superannuation death benefits paid to trustee of deceased estate

302-5 Division applies to superannuation death benefits paid from complying plans etc.

This Division applies to *superannuation death benefits that are:

(a) paid from a *complying superannuation plan; or

(b) *superannuation guarantee payments, *small superannuation account payments, *unclaimed money payments, *superannuation co-contribution benefit payments or *superannuation annuity payments.

Note: For the tax treatment of superannuation member benefits paid from complying plans, see Division 301. Superannuation benefits paid from superannuation plans that are not complying superannuation plans are dealt with in Division 305.

302-10 Superannuation death benefits paid to trustee of deceased estate

(1) This sectionapplies to you if:

(a) you are the trustee of a deceased estate; and

(b) you receive a *superannuation death benefit in your capacity as trustee.

(2) To the extent that 1 or more beneficiaries of the estate who were *death benefits dependants of the deceased have benefited, or may be expected to benefit, from the *superannuation death benefit:

(a) the benefit is treated as if it had been paid to you as a person who was a death benefits dependant of the deceased; and

(b) the benefit is taken to be income to which no beneficiary is presently entitled.

(3) To the extent that 1 or more beneficiaries of the estate who were not *death benefits dependants of the deceased have benefited, or may be expected to benefit, from the *superannuation death benefit:

(a) the benefit is treated as if it had been paid to you as a person who was not a death benefits dependant of the deceased; and

(b) the benefit is taken to be income to which no beneficiary is presently entitled.

Subdivision 302-B - Death benefits to dependant

Table of sections

Lump sum death benefits to dependants are tax free

302-60 All of superannuation lump sum is tax free

Superannuation income stream - either deceased died aged 60 or above or dependant aged 60 or above

302-65 Superannuation income stream benefits are tax free

Superannuation income stream - deceased died aged under 60 and dependant aged under 60

302-70 Superannuation income stream - tax free status of tax free component

302-75 Superannuation income stream - taxable component attracts 15% offset

Death benefits to dependant - elements untaxed in fund

302-80 Treatment of element untaxed in the fund of superannuation income stream death benefit to dependant

302-85 Deceased died aged 60 or above or dependant aged 60 years or above - superannuation income stream - element untaxed in fund attracts 10% offset

302-90 Deceased died aged under 60 and dependant aged under 60 - superannuation income stream - element untaxed in fund is assessable income

Lump sum death benefits to dependants are tax free

302-60 All of superannuation lump sum is tax free

A *superannuation lump sum that you receive because of the death of a person of whom you are a *death benefits dependant is not assessable income and is not *exempt income.

Superannuation income stream - either deceased died aged 60 or above or dependant aged 60 or above

302-65 Superannuation income stream benefits are tax free

A *superannuation income stream benefit that you receive because of the death of a person of whom you are a *death benefits dependant is not assessable income and is not *exempt income in either or both of the following cases:

(a) you are 60 years or over when you receive the benefit;

(b) the deceased died aged 60 or over.

Note: If your superannuation income stream benefit includes an element untaxed in the fund, see section 302-85.

Superannuation income stream - deceased died aged under 60 and dependant aged under 60

302-70 Superannuation income stream - tax free status of tax free component

The *tax free component of a *superannuation income stream benefit that you receive because of the death of a person of whom you are a *death benefits dependant is not assessable income and is not *exempt income if:

(a) you are under 60 when you receive the benefit; and

(b) the deceased died aged under 60.

Note: For tax free component , see Subdivision 307-C.

302-75 Superannuation income stream - taxable component attracts 15% offset

(1) The *taxable component of a *superannuation income stream benefit that you receive because of the death of a person of whom you are a *death benefits dependant is assessable income if:

(a) you are under 60 when you receive the benefit; and

(b) the deceased died aged under 60.

Note: For taxable component , see Subdivision 307-C.

(2) You are entitled to a *tax offset equal to 15% of the *taxable component of the benefit.

Death benefits to dependant - elements untaxed in fund

302-80 Treatment of element untaxed in the fund of superannuation income stream death benefit to dependant

If a *superannuation income stream benefit that you receive because of the death of a person of whom you are a *death benefits dependant includes an *element untaxed in the fund:

(a) the *tax free component (if any) of the benefit is treated in the same way as the tax free component of a superannuation income stream benefit under section 302-65 or 302-70; and

(b) the *element taxed in the fund (if any) of the benefit is treated in the same way as the *taxable component of a superannuation income stream benefit under section 302-65 or 302-75; and

(c) the element untaxed in the fund is treated in accordance with section 302-85 or 302-90.

302-85 Deceased died aged 60 or above or dependant aged 60 years or above - superannuation income stream: element untaxed in fund attracts 10% offset

(1) The *element untaxed in the fund of a *superannuation income stream benefit that you receive because of the death of a person of whom you are a *death benefits dependant is assessable income in either or both of the following cases:

(a) you are 60 years or over when you receive the benefit;

(b) the deceased died aged 60 or above.

(2) You are entitled to a *tax offset equal to 10% of the *element untaxed in the fund of the benefit.

302-90 Deceased died aged under 60 and dependant aged under 60 - superannuation income stream: element untaxed in fund is assessable income

The *element untaxed in the fund of a *superannuation income stream benefit that you receive because of the death of a person of whom you are a *death benefits dependant is assessable income if:

(a) you are aged under 60 when you receive the benefit; and

(b) the deceased died aged under 60.

Subdivision 302-C - Death benefits to non-dependant

Table of sections

Superannuation lump sum

302-140 Superannuation lump sum - tax free status of tax free component

302-145 Superannuation lump sum - element taxed in the fund taxed at 15%, element untaxed in the fund taxed at 30%

Superannuation lump sum

302-140 Superannuation lump sum - tax free status of tax free component

The *tax free component of a *superannuation lump sum that you receive because of the death of a person of whom you are not a *death benefits dependant is not assessable income and is not *exempt income.

Note: For tax free component , see Subdivision 307-C.

302-145 Superannuation lump sum - element taxed in the fund taxed at 15%, element untaxed in the fund taxed at 30%

(1) If you receive a *superannuation lump sum because of the death of a person of whom you are not a *death benefits dependant, the *taxable component of the lump sum is assessable income.

Note: For taxable component , see Subdivision 307-C.

(2) You are entitled to a *tax offset that ensures that the rate of income tax on the *element taxed in the fund of the lump sum does not exceed 15%.

(3) You are entitled to a *tax offset that ensures that the rate of income tax on the *element untaxed in the fund of the lump sum does not exceed 30%.

Subdivision 302-D - Definitions relating to dependants

Table of sections

302-195 Meaning of death benefits dependant

302-200 What is an interdependency relationship ?

302-195 Meaning of death benefits dependant

A death benefits dependant , of a person who has died, is:

(a) the deceased person’s *spouse or former spouse; or

(b) the deceased person’s *child, aged less than 18; or

(c) any other person with whom the deceased person had an interdependency relationship under section 302-200 just before he or she died; or

(d) any other person who was a dependant of the deceased person just before he or she died.

302-200 What is an interdependency relationship ?

(1) Two persons (whether or not related by family) have an interdependency relationship under this section if:

(a) they have a close personal relationship; and

(b) they live together; and

(c) one or each of them provides the other with financial support; and

(d) one or each of them provides the other with domestic support and personal care.

(2) In addition, 2 persons (whether or not related by family) also have an interdependency relationship under this section if:

(a) they have a close personal relationship; and

(b) they do not satisfy one or more of the requirements of an interdependency relationship mentioned in paragraphs (1)(b), (c) and (d); and

(c) the reason they do not satisfy those requirements is that either or both of them suffer from a physical, intellectual or psychiatric disability.

(3) The regulations may specify:

(a) matters that are, or are not, to be taken into account in determining under subsection (1) or (2) whether 2 persons have an interdependency relationship under this section; and

(b) circumstances in which 2 persons have, or do not have, an interdependency relationship under this section.

Division 303 - Superannuation benefits paid in special circumstances

Table of sections

303-5 Commutation of income stream if you are under 25 etc.

303-5 Commutation of income stream if you are under 25 etc.

(1) A *superannuation lump sum that you receive from a *complying superannuation plan is not assessable income and is not *exempt income if:

(a) the superannuation lump sum arises from the commutation of a *superannuation income stream; and

(b) any of these conditions are satisfied:

(i) you are under 25 when you receive the superannuation lump sum;

(ii) the commutation takes place because you turn 25;

(iii) you are permanently disabled when you receive the superannuation lump sum; and

(c) you had received one or more *superannuation income stream benefits from the superannuation income stream before the commutation because of the death of a person of whom you are a *death benefits dependant.

(2) Subsection (1) applies despite Divisions 301 and 302.

Division 304 - Superannuation benefits in breach of legislative requirements etc.

Guide to Division 304

304-1 What this Division is about

This Division overrides the tax treatment in Divisions 301 and 302 if payments from complying superannuation plans etc. are in breach of payment and other rules.

Table of sections

Operative provisions

304-5 Application

304-10 Superannuation benefits in breach of legislative requirements etc.

304-15 Excess payments from release authorities

Operative provisions

304-5 Application

This Division applies despite Divisions 301, 302 and 303.

304-10 Superannuation benefits in breach of legislative requirements etc.

(1) Include in your assessable income the amount of a *superannuation benefit if:

(a) any of the following applies:

(i) you received the benefit from a *complying superannuation fund or from a *superannuation fund that was previously a complying superannuation fund;

(ii) the benefit is attributable to the assets of a complying superannuation fund or from a superannuation fund that was previously a complying superannuation fund; and

(b) any of the following applies:

(i) the fund was not (when you received the benefit) maintained as required by section 62 of the Superannuation Industry (Supervision) Act 1993;

(ii) you received the benefit otherwise than in accordance with payment standards prescribed under subsection 31(1) of the Superannuation Industry (Supervision) Act 1993.

(2) Include in your assessable income the amount of a *superannuation benefit if:

(a) any of the following applies:

(i) you received the benefit from a *complying approved deposit fund or from an *approved deposit fund that was previously a complying approved deposit fund;

(ii) the benefit is attributable to the assets of a complying approved deposit fund or from an approved deposit fund that was previously a complying approved deposit fund; and

(b) you received the benefit otherwise than in accordance with payment standards prescribed under subsection 32(1) of the Superannuation Industry (Supervision) Act 1993.

(3) Include in your assessable income the amount of a *superannuation benefit you receive from an *RSA in breach of the Retirement Savings Accounts Act 1997, regulations under that Act or payment standards prescribed under subsection 38(2) of that Act.

(4) However, you do not have to include the amount in your assessable income to the extent that the Commissioner is satisfied that it is unreasonable that it be included having regard to:

(a) for subsection (1) or (2) - the nature of the fund; and

(b) any other matters that the Commissioner considers relevant.

304-15 Excess payments from release authorities

(1) This section applies to a *superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with:

(a) section 292-410; or

(b) section 292-80B of the Income Tax (Transitional Provisions) Act 1997.

(2) The *superannuation benefit is not assessable income and is not *exempt income to the extent that it does not exceed the amount mentioned in subsection (3).

(3) The amount is the amount of *excess contributions tax stated in the release authority, reduced (but not below zero) by the amount of any *superannuation benefit that was not assessable income and not *exempt income under a previous operation of subsection (2) in relation to the release authority.

(4) The *superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3).

Division 305 - Superannuation benefits paid from non-complying superannuation plans

Table of Subdivisions

Guide to Division 305

305-A Superannuation benefits from Australian non-complying superannuation funds

305-B Superannuation benefits from foreign superannuation funds

Guide to Division 305

305-1 What this Division is about

This Division sets out the tax treatment of superannuation benefits received by members of non-complying plans (including foreign superannuation funds).

Subdivision 305-A - Superannuation benefits from Australian non-complying superannuation funds

Table of sections

305-5 Tax treatment of superannuation benefits from certain Australian non-complying superannuation funds

305-5 Tax treatment of superannuation benefits from certain Australian non-complying superannuation funds

A *superannuation benefit that you receive from a *non-complying superannuation fund that is an *Australian superannuation fund (for the income year in which the benefit is paid) is *exempt income, unless:

(a) if the *superannuation fund has ever been a *complying superannuation fund - it last stopped being one for the income year in which 1 July 1995 occurred or a later income year; and

(b) if it has ever been a *foreign superannuation fund - it last stopped being one for the income year in which 1 July 1995 occurred or a later income year.

Subdivision 305-B - Superannuation benefits from foreign superannuation funds

Table of sections

Application of Subdivision

305-55 Restriction to lump sums received from certain foreign superannuation funds

Lump sums received within 6 months after Australian residency or termination of foreign employment etc.

305-60 Lump sums tax free - foreign resident period

305-65 Lump sums tax free - Australian resident period

Lump sums to which sections 305-60 and 305-65 do not apply

305-70 Lump sums received more than 6 months after Australian residency or termination of foreign employment etc.

305-75 Lump sums - applicable fund earnings

305-80 Lump sums paid into complying superannuation plans - choice

Application of Subdivision

305-55 Restriction to lump sums received from certain foreign superannuation funds

This Subdivision applies if:

(a) you receive a *superannuation lump sum from a *foreign superannuation fund; and

(b) the fund is an entity mentioned in item 4 of the table in subsection 295-490(1) (which deals with deductions for superannuation entities).

Lump sums received within 6 months after Australian residency or termination of foreign employment etc.

305-60 Lump sums tax free - foreign resident period

A *superannuation lump sum you receive from a *foreign superannuation fund is not assessable income and is not *exempt income if:

(a) you receive it within 6 months after you become an Australian resident; and

(b) it relates only to a period:

(i) when you were not an Australian resident; or

(ii) starting after you became an Australian resident and ending before you receive the payment; and

(c) it does not exceed the amount in the fund that was vested in you when you received the payment.

Note: If you received the lump sum after that period of 6 months, or the lump sum exceeds the vested amount, the payment will fall within section 305-70.

305-65 Lump sums tax free - Australian resident period

(1) A *superannuation lump sum you receive is not assessable income and is not *exempt income if:

(a) you receive it in consequence of:

(i) the termination of your employment as an employee, or as the holder of an office, in a foreign country; or

(ii) the termination of your engagement on qualifying service on an approved project (within the meaning of section 23AF of the Income Tax Assessment Act 1936), in relation to a foreign country; and

(b) it relates only to the period of that employment, holding of office, or engagement; and

(c) you were an Australian resident during the period of the employment, holding of office or engagement; and

(d) you receive the lump sum within 6 months after the termination; and

(e) the lump sum is not exempt from taxation under the law of the foreign country; and

(f) for a period of employment or holding an office - your foreign earnings from the employment or office are exempt from income tax under section 23AG of the Income Tax Assessment Act 1936; and

(g) for a period of engagement on qualifying service on an approved project - your eligible foreign remuneration from the service is exempt from income tax under section 23AF of that Act.

Note: If you received the lump sum after that period of 6 months, or the lump sum exceeds the vested amount, the lump sum will fall within section 305-70.

(2) For the purposes of subsection (1), treat the termination of employment, holding of office, or engagement as including:

(a) retirement from the employment, office or engagement; and

(b) cessation of the employment, office or engagement because of death.

Lump sums to which sections 305-60 and 305-65 do not apply

305-70 Lump sums received more than 6 months after Australian residency or termination of foreign employment etc.

Superannuation lump sums to which section applies

(1) This section applies to a *superannuation lump sum you receive from a *foreign superannuation fund if:

(a) you are an Australian resident when you receive the lump sum; and

(b) sections 305-60 and 305-65 do not apply to the lump sum.

Assessable part

(2) Include in your assessable income so much of the lump sum (excluding any amount mentioned in subsection (4)) as equals:

(a) your *applicable fund earnings (worked out under section 305-75); or

(b) if you have made a choice under section 305-80 - your applicable fund earnings, less the amount covered by the choice.

Note: Under section 305-80, if your lump sum is paid into a complying superannuation plan, you can choose to have some or all of the applicable fund earnings excluded from your assessable income. The amount you choose is included in the assessable income of the plan: see section 295-200.

Non-assessable, non-exempt part

(3) The remainder of the lump sum is not assessable income and is not *exempt income.

Amount paid into another foreign superannuation fund

(4) Any part of the lump sum that is paid into another *foreign superannuation fund is not assessable income and is not *exempt income.

Note: However, your applicable fund earnings under section 305-75 in relation to a later lump sum paymentout of the other foreign superannuation fund may include an amount ( previously exempt fund earnings ) attributable to the lump sum.

305-75 Lump sums - applicable fund earnings

(1) This section applies if you need to work out an amount (your applicable fund earnings ) in relation to a *superannuation lump sum to which section 305-70 applies that you receive from a *foreign superannuation fund.

If you were an Australian resident at all times

(2) If you were an Australian resident at all times during the period to which the lump sum relates, the amount of your applicable fund earnings is the amount (not less than zero) worked out as follows:

(a) work out the total of the following amounts:

(i) the part of the lump sum that is attributable to contributions made by or in respect of you on or after the day when you became a member of the fund (the start day );

(ii) the part of the lump sum (if any) that is attributable to amounts transferred into the fund from any other *foreign superannuation fund during the period;

(b) subtract that total amount from the amount in the fund that was vested in you when the lump sum was paid (before any deduction for *foreign tax);

(c) add the total of all your previously exempt fund earnings (if any) covered by subsections (5) and (6).

If you were not an Australian resident at all times

(3) If you become an Australian resident after the start of the period to which the lump sum relates (but before you received it) the amount of your applicable fund earnings is the amount (not less than zero) worked out as follows:

(a) work out the total of the following amounts:

(i) the amount in the fund that was vested in you just before the day (the start day ) you first became an Australian resident during the period;

(ii) the part of the payment that is attributable to contributions to the fund made by or in respect of you during the remainder of the period;

(iii) the part of the payment (if any) that is attributable to amounts transferred into the fund from any other *foreign superannuation fund during the remainder of the period;

(b) subtract that total amount from the amount in the fund that was vested in you when the lump sum was paid (before any deduction for *foreign tax);

(c) multiply the resulting amount by the proportion of the total days during the period when you were an Australian resident;

(d) add the total of all previously exempt fund earnings (if any) covered by subsections (5) and (6).

Previous lump sums from the fund

(4) If the lump sum is not the first lump sum from the fund you have received to which this section applies, for subsections (2) and (3) the start day is the day after you received the most recent such lump sum.

Previously exempt fund earnings

(5) You have an amount of previously exempt fund earnings in respect of the lump sum if:

(a) part or all of the amount in the fund that was vested in you when the lump sum was paid (before any deduction for *foreign tax) is attributable to the amount; and

(b) the amount is attributable to a payment received from a *foreign superannuation fund; and

(c) the amount would have been included in your assessable income under subsection 305-70(2) by the application of this section, but for the payment having been received by another foreign superannuation fund.

(6) The amount of your previously exempt fund earnings is the amount mentioned in paragraph (5)(c) (disregarding the addition of previously exempt fund earnings under subsection (2) or (3) of this section).

305-80 Lump sums paid into complying superannuation plans - choice

(1) This section applies if:

(a) section 305-70 applies to a *superannuation lump sum that is paid from a *foreign superannuation fund; and

(b) you are taken to receive the lump sum under section 307-15; and

(c) all of the lump sum is paid into a *complying superannuation fund; and

(d) immediately after the lump sum is paid into the complying superannuation fund, you no longer have a *superannuation interest in the foreign superannuation fund.

(2) You may choose for all or part of your *applicable fund earnings worked out under section 305-75 (but not exceeding the amount of the lump sum) to be included in the assessable income of the *complying superannuation plan.

Note: Section 295-200 provides for the amount specified in the choice to be included in the assessable income of the complying superannuation plan.

(3) Your choice:

(a) must be in writing; and

(b) must comply with the requirements (if any) specified in the regulations.

Division 306 - Roll-overs etc.

Guide to Division 306

306-1 What this Division is about

This Division sets out the tax treatment of payments made from one superannuation plan to another superannuation plan, and of similar payments.

Table of sections

Operative provisions

306-5 Effect of a roll-over superannuation benefit

306-10 Roll-over superannuation benefit

306-15 Tax on excess untaxed roll-over amounts

306-20 Effect of payment to government of unclaimed superannuation money

Operative provisions

306-5 Effect of a roll-over superannuation benefit

A *roll-over superannuation benefit that you are taken to receive under section 307-15 is not assessable income and is not *exempt income.

Note: Roll-over superannuation benefits are paid into a complying superannuation plan or are used to purchase a superannuation annuity on your behalf. However, you are taken to receive the benefit under subsection 307-15(1).

306-10 Roll-over superannuation benefit

A *superannuation benefit is a roll-over superannuation benefit if:

(a) the benefit is a *superannuation lump sum and a *superannuation member benefit; and

(b) the benefit is not a superannuation benefit of a kind specified in the regulations; and

(c) the benefit satisfies any of the following conditions:

(i) it is paid from a *complying superannuation plan;

(ii) it is an *unclaimed money payment;

(iii) it arises from the commutation of a *superannuation annuity; and

(d) the benefit satisfies any of the following conditions:

(i) it is paid to a complying superannuation plan;

(ii) it is paid to an entity to purchase a superannuation annuity from the entity.

Note 1: A superannuation benefit may be paid from one superannuation plan of a superannuation provider to another superannuation plan of the same provider.

Note 2: For the treatment of amounts transferred within a superannuation plan, see subsection 307-5(8).

306-15 Tax on excess untaxed roll-over amounts

(1) This section applies to a *superannuation benefit if:

(a) it is a *roll-over superannuation benefit that is paid into a *superannuation plan; and

(b) you are taken to receive the benefit under section 307-15; and

(c) the benefit consists of, or includes, an amount that is an *element untaxed in the fund; and

(d) the amount mentioned in paragraph (c) exceeds your *untaxed plan cap amount (see section 307-350) for the *superannuation plan just before you are taken to receive the benefit.

(2) The excess untaxed roll-over amount is the amount of the excess mentioned in paragraph (1)(d).

(3) You are liable to pay income tax on the *excess untaxed roll-over amount at the rate declared by the Parliament in respect of such amounts.

Note 1: The tax is imposed in the Superannuation (Excess Untaxed Roll-over Amounts Tax) Act 2007, and the amount of tax is set out in that Act.

Note 2: See the Taxation Administration Act 1953 for provisions dealing with the payment of the tax.

306-20 Effect of payment to government of unclaimed superannuation money

An *unclaimed money payment that you are taken to receive under section 307-15 because it is paid in accordance with the Superannuation (Unclaimed Money and Lost Members) Act 1999 to the Commissioner or a State or Territory authority (within the meaning of that Act) is not assessable income and is not *exempt income.

Division 307 - Key concepts relating to superannuation benefits

Table of Subdivisions

Guide to Division 307

307-A Superannuation benefits generally

307-B Superannuation lump sums and superannuation income stream benefits

307-C Components of a superannuation benefit

307-D Superannuation interests

307-E Elements taxed and untaxed in the fund of the taxable component of superannuation benefit

307-F Low rate cap and untaxed plan cap amounts

307-G Other concepts

Guide to Division 307

307-1 What this Division is about

This Division defines concepts used in Divisions 301 to 306, such as superannuation benefit , and the tax free component and taxable component of such benefits. To work out those components, it is often necessary to work out the corresponding components of the superannuation interest from which the benefit is paid (see Subdivision 307-D).

This Division also defines the element taxed in the fund and the element untaxed in the fund of superannuation benefits, which are relevant to superannuation benefits paid from untaxed funds etc. (see Subdivision 307-D).

Subdivision 307-F defines the concessional limits used in Division 301 known as the low rate cap amount and untaxed plan cap amount.

Subdivision 307-A - Superannuation benefits generally

Table of sections

307-5 What is a superannuation benefit ?

307-10 Payments that are not superannuation benefits

307-15 Payments for your benefit or at your direction or request

307-5 What is a superannuation benefit ?

(1) A superannuation benefit is a payment described in the table.

(2) A superannuation member benefit is a payment described in column 2 of the table.

(3) A *superannuation benefit is also a superannuation member benefit if:

(a) the superannuation benefit arises from the commutation of a *superannuation income stream; and

(b) it would be a *superannuation death benefit apart from this subsection; and

(c) the benefit is paid after the later of:

(i) 6 months after the death of the deceased person; or

(ii) 3 months after the grant of probate of that deceased person’s will or letters of administration of that deceased person’s estate.

(4) A superannuation death benefit is a payment described in column 3 of the table.

(5) Subsection (6) applies if a *contributions-splitting superannuation benefit or a *family law superannuation payment is paid to you because another person is a member of a *superannuation fund, holder of an *RSA or depositor with an *approved deposit fund, or the annuitant under a *superannuation annuity.

(6) For the purposes of this section (and despite section 307-15):

(a) treat yourself as a member of the fund, holder of the *RSA, depositor with the fund or annuitant under the *superannuation annuity; and

(b) do not treat the other person as a member of the fund, holder of the RSA, depositor with the fund or annuitant under the superannuation annuity.

Note: This means that the benefit is a superannuation benefit for you but not for the other person.

(7) A family law superannuation payment is a payment that:

(a) is a payment of any of the following kinds:

(i) a payment in accordance with Part VIIIB of the Family Law Act 1975;

(ii) a payment in accordance with the Family Law (Superannuation) Regulations 2001;

(iii) a payment in accordance with Part 7A of the Superannuation Industry (Supervision) Regulations 1994;

(iv) a payment in accordance with Part 4A of the Retirement Savings Accounts Regulations 1997;

(v) a payment specified in the regulations; and

(b) satisfies the requirements (if any) specified in the regulations.

Treatment of amounts transferred within a superannuation plan

(8) If an amount is transferred from one *superannuation interest in a *superannuation plan to another superannuation interest in the same plan, treat the transfer as a payment in determining whether the transfer of the amount is a superannuation benefit or a roll-over superannuation benefit.

307-10 Payments that are not superannuation benefits

A payment of any of the following kinds is not a superannuation benefit :

(a) an amount payable to a person under an income stream because of the person’s temporary inability to perform normal employment duties;

(b) an amount:

(i) received by you, or to which you are entitled, as the result of the commutation of a pension payable from a *constitutionally protected fund; and

(ii) wholly applied in paying any superannuation contributions surcharge (as defined in section 38 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997);

(c) an amount:

(i) received by you, or to which you are entitled, as the result of the commutation of a pension payable by a superannuation provider (within the meaning of the Superannuation Contributions Tax (Assessment and Collection) Act 1997); and

(ii) wholly applied in paying any superannuation contributions surcharge (as defined in section 43 of that Act).

307-15 Payments for your benefit or at your direction or request

(1) This section applies for the purposes of:

(a) determining whether a payment is a superannuation benefit ; and

(b) determining whether a *superannuation benefit is made to you, or received by you.

(2) A payment is treated as being made to you, or received by you, if it is made:

(a) for your benefit; or

(b) to another person or to an entity at your direction or request.

Note: Paragraph (b) would cover, for example, a direction by you that a payment be rolled over from your original superannuation fund into another superannuation fund.

Subdivision 307-B - Superannuation lump sums and superannuation income stream benefits

Table of sections

307-65 Meaning of superannuation lump sum

307-70 Meaning of superannuation income stream and superannuation income stream benefit

307-65 Meaning of superannuation lump sum

A superannuation lump sum is a *superannuation benefit that is not a *superannuation income stream benefit (see section 307-70).

307-70 Meaning of superannuation income stream and superannuation income stream benefit

(1) A superannuation income stream benefit is a *superannuation benefit specified in the regulations that is paid from a *superannuation income stream.

(2) A superannuation income stream has the meaning given by the regulations.

Subdivision 307-C - Components of a superannuation benefit

Table of sections

307-120 Components of superannuation benefit

307-125 Proportioning rule

307-130 Superannuation guarantee payment consists entirely of taxable component

307-135 Superannuation co-contribution benefit payment consists entirely of tax free component

307-140 Contributions-splitting superannuation benefit consists entirely of taxable component

307-145 Modification for disability benefits

307-150 Modification in respect of superannuation lump sum with element untaxed in fund

307-120 Components of superannuation benefit

(1) Work out the following components of a *superannuation benefit under this Subdivision:

(a) the tax free component ;

(b) the taxable component .

(2) Work out those components under:

(a) if the benefit is not mentioned in paragraph (b), (c) or (d) - section 307-125; or

(b) if the benefit is a *superannuation guarantee payment - section 307-130; or

(c) if the benefit is a *superannuation co-contribution benefit payment - section 307-135; or

(d) if the benefit is a *contributions-splitting superannuation benefit - section 307-140.

(3) Those components may be modified under sections 307-145 (which deals with certain disability benefits) and 307-150 (which deals with certain *elements untaxed in fund).

307-125 Proportioning rule

(1) The object of this section is to ensure that the *tax free component and *taxable component of a *superannuation benefit are calculated by:

(a) first, determining the proportions of the *value of the *superannuation interest that those components represent; and

(b) next, applying those proportions to the benefit.

(2) The *superannuation benefit is taken to be paid in a way such that each of those components of the benefit bears the same proportion to the amount of the benefit that the corresponding component of the *superannuation interest bears to the *value of the superannuation interest.

Example: The amount of a superannuation lump sum is $100. Just before the benefit is paid, the value of the superannuation interest was $1000 (of which $200 was the tax free component and $800 was the taxable component). For the lump sum, the tax free component is $20 and the taxable component is $80.

(3) For the purposes of subsection (2), determine the *value of the *superannuation interest, and the amount of each of those components of the interest, at whichever of the following times is applicable:

(a) if the *superannuation benefit is a *superannuation income stream benefit - when the relevant *superannuation income stream commenced;

(b) if the superannuation benefit is a *superannuation lump sum - just before the benefit is paid;

(c) despite paragraphs (a) and (b), if the superannuation benefit arises from the commutation of a superannuation income stream - when the relevant *superannuation income stream commenced.

(4) Subsection (2) does not apply to a *superannuation benefit if any of the following applies:

(a) the regulations specify an alternative method for determining those components of the benefit;

(b) a determination under subsection (5) specifies an alternative method for determining those components of the benefit;

(c) the Commissioner consents in writing to the use of another method for determining those components of the benefit.

If so, use that method to determine those components of the benefit.

(5) For the purposes of paragraph (4)(b), the Commissioner may determine, by legislative instrument, one or more alternative methods for determining those components of a *superannuation benefit.

(6) If the *superannuation benefit is an *unclaimed money payment or a *small superannuation account payment, for the purposes of this section:

(a) treat the benefit as a superannuation benefit paid from a *superannuation interest; and

(b) treat the amount of the benefit as the *value of that superannuation interest just before the time the benefit is paid.

307-130 Superannuation guarantee payment consists entirely of taxable component

The components of a *superannuation benefit that is a *superannuation guarantee payment are as follows:

(a) the *tax free component is nil;

(b) the *taxable component is the amount of the benefit.

307-135 Superannuation co-contribution benefit payment consists entirely of tax free component

The components of a *superannuation benefit that is a *superannuation co-contribution benefit payment are as follows:

(a) the *tax free component is the amount of the benefit;

(b) the *taxable component is nil.

307-140 Contributions-splitting superannuation benefit consists entirely of taxable component

The components of a *superannuation benefit that is a *contributions-splitting superannuation benefit are as follows:

(a) the *tax free component is nil;

(b) the *taxable component is the amount of the benefit.

307-145 Modification for disability benefits

(1) Work out the tax free component of the *superannuation benefit under subsection (2) if the benefit is a *superannuation lump sum and a *disability superannuation benefit.

(2) The tax free component is the sum of:

(a) the *tax free component of the benefit worked out apart from this section; and

(b) the amount worked out under subsection (3).

However, the tax free component cannot exceed the amount of the benefit.

(3) Work out the amount by applying the following formula:

Amount of benefit x (Days to retirement / (Service days + Days to retirement))

where:

days to retirement is the number of days from the day on which the person stopped being capable of being *gainfully employed to his or her *last retirement day.

service days is the number of days in the *service period for the lump sum.

(4) The balance of the *superannuation benefit is the taxable component of the benefit.

307-150 Modification in respect of superannuation lump sum with element untaxed in fund

(1) This section applies to a *superannuation lump sum if:

(a) it is not a *roll-over superannuation benefit; or

(b) it is a roll-over superannuation benefit that includes an *element untaxed in the fund, all or part of which will be included in the assessable income of the *superannuation provider in relation to the *superannuation fund into which the benefit is paid.

(2) However, this section applies to the *superannuation lump sum only to the extent that it is attributable to a *superannuation interest that existed just before 1 July 2007.

(3) If the *superannuation lump sum includes an *element untaxed in the fund:

(a) increase the *tax free component of the benefit by the amount that is the lesser of these amounts:

(i) the amount worked out under subsection (4); and

(ii) the amount of the element untaxed in the fund (apart from this section); and

(b) reduce the element untaxed in the fund by the lesser of those amounts.

(4) Work out the amount by applying the following formula:

Original tax free component and untaxed element x (Number of days in the service period for the lump sum that occurred before 1 July 1983 / Number of days in the service period for the lunp sum)

where:

original tax free component and untaxed element is the sum of:

(a) the *tax free component of the *superannuation benefit (apart from this section); and

(b) the *element untaxed in the fund of the superannuation benefit (apart from this section).

(5) If the benefit is in part attributable to a *crystallised pre-July 83 amount, in working out the *tax free component of the *superannuation benefit (apart from this section) for the purposes of subsection (4), disregard the amount of the benefit that is attributable to the *crystallised segment of the *superannuation interest from which the benefit is paid.

Subdivision 307-D - Superannuation interests

Table of sections

307-200 Regulations relating to meaning of superannuation interests

307-205 Value of superannuation interest

307-210 Tax free component of superannuation interest

307-215 Taxable component of superannuation interest

307-220 What is the contributions segment ?

307-225 What is the crystallised segment ?

307-200 Regulations relating to meaning of superannuation interests

(1) In the circumstances specified in the regulations, treat a superannuation interest as two or more superannuation interests in the way specified in the regulations.

(2) In the circumstances specified in the regulations, treat 2 or more superannuation interests as one superannuation interest in the way specified in the regulations.

(3) Regulations for the purposes of this section may specify a way of treating a *superannuation interest in relation to one or more of the following aspects of the interest:

(a) the *tax free component (and the *contributions segment and *crystallised segment relating to that component);

(b) the *taxable component;

(c) the *element taxed in the fund of the taxable component;

(d) the *element untaxed in the fund of the taxable component.

(4) Regulations for the purposes of subsection (1) may specify a way of allocating an amount relating to a *superannuation interest treated as two or more superannuation interests in accordance with those regulations to those interests.

(5) Subsections (3) and (4) do not limit the regulations that may be made for the purposes of this section.

307-205 Value of superannuation interest

The value of a *superannuation interest at a particular time is:

(a) if the regulations specify a method for determining the value of the superannuation interest - that value; or

(b) otherwise - the total amount of all the *superannuation lump sums that could be payable from the interest at that time.

307-210 Tax free component of superannuation interest

The tax free component of a *superannuation interest is so much of the *value of the interest as consists of:

(a) the *contributions segment of the interest; and

(b) the *crystallised segment of the interest.

Note: If superannuation benefits have been paid from the superannuation interest, the amount of the tax free component of the interest will be reduced by the tax free components of those superannuation benefits: see section 307-125.

307-215 Taxable component of superannuation interest

The taxable component of a *superannuation interest is the *value of the interest less the *tax free component of the interest.

307-220 What is the contributions segment ?

(1) The contributions segment of a *superannuation interest is so much of the *value of the interest as consists of contributions made after 30 June 2007, to the extent that they have not been and will not be included in the assessable income of the *superannuation provider in relation to the *superannuation plan in which the interest is held.

(2) For the purposes of this section:

(a) in determining whether contributions are included in the contributions segment under subsection (1):

(i) disregard the *taxable component of a *roll-over superannuation benefit paid into the interest; and

(ii) for a *superannuation plan that is a *constitutionally protected fund - treat the superannuation plan as if it were not a constitutionally protected fund; and

(b) disregard section 295-180 and Subdivision 295-D.

(3) For the purposes of subparagraph (2)(a)(i), treat the *excess untaxed roll-over amount (if any) of the *roll-over superannuation benefit as part of the *tax free component of the benefit instead of the *taxable component of the benefit.

307-225 What is the crystallised segment ?

(1) To work out the crystallised segment of a *superannuation interest, first assume that:

(a) an eligible termination payment had been made in respect of the holder of the interest just before 1 July 2007; and

(b) the amount of the eligible termination payment had been equal to the *value of the interest at that time.

(2) The crystallised segment of the *superannuation interest is so much of the *value of the interest as consists of the total of the following components of the eligible termination payment:

(a) the concessional component;

(b) the post-June 1994 invalidity component;

(c) the undeducted contributions;

(d) the CGT exempt component;

(e) the pre-July 83 component.

(3) For the purposes of paragraph (2)(e), disregard the *value of the interest just before 1 July 2007 to the extent that it would consist, apart from this subsection, of the *element untaxed in the fund of the *taxable component of a *superannuation benefit constituted by the eligible termination payment.

(4) In this section, the following terms have the same meaning as in subsection 27A(1) of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007):

(a) concessional component ;

(b) post-June 1994 invalidity component ;

(c) undeducted contributions ;

(d) CGT exempt component ;

(e) pre-July 83 component ;

(f) eligible termination payment .

Subdivision 307-E - Elements taxed and untaxed in the fund of the taxable component of superannuation benefit

Table of sections

307-275 Element taxed in the fund and element untaxed in the fund of superannuation benefits

307-280 Superannuation benefits from constitutionally protected funds etc.

307-285 Trustee can choose to convert element taxed in the fund to element untaxed in the fund

307-290 Taxed and untaxed elements of death benefit superannuation lump sums

307-295 Superannuation benefits from public sector superannuation schemes may include untaxed element

307-275 Element taxed in the fund and element untaxed in the fund of superannuation benefits

(1) The *taxable component of a *superannuation benefit consists of an element taxed in the fund or an element untaxed in the fund , or both.

(2) The *taxable component of a *superannuation benefit consists wholly of an element taxed in the fund except as provided in a later section of this Subdivision.

(3) Despite subsection (2), the *taxable component of any of the following kinds of *superannuation benefit consists wholly of an element untaxed in the fund :

(a) a *small superannuation account payment;

(b) a *superannuation guarantee payment.

307-280 Superannuation benefits from constitutionally protected funds etc.

(1) The *taxable component of a *superannuation benefit paid from a *superannuation fund that is a *constitutionally protected fund consists wholly of an element untaxed in the fund .

(2) Despite subsection (1), if:

(a) the benefit is a *superannuation lump sum; and

(b) the benefit is attributable to one or more *roll-over superannuation benefits that consisted of, or included, an *element taxed in the fund;

the *taxable component of the benefit has an element taxed in the fund equal to the total of those elements taxed in the fund.

(3) The *taxable component of a *superannuation income stream benefit consists wholly of an element untaxed in the fund if it is paid from a *superannuation fund that was a *constitutionally protected fund on the first day of the period to which the *superannuation income stream relates.

307-285 Trustee can choose to convert element taxed in the fund to element untaxed in the fund

(1) If:

(a) you receive a *superannuation benefit from a *superannuation fund; and

(b) the trustee of the fund gives you written notice specifying an amount as the *element untaxed in the fund of the *taxable component of the benefit; and

(c) the notice is given within the time and in the manner approved by the Commissioner in writing; and

(d) the superannuation fund came into operation on or before 5 September 2006;

the taxable component consists of an element untaxed in the fund equal to the specified amount.

(2) The trustee of the fund can give only one notice under subsection (1) in relation to a particular *superannuation lump sum.

307-290 Taxed and untaxed elements of death benefit superannuation lump sums

(1) This section applies to a *superannuation death benefit that is a *superannuation lump sum, in relation to which a deduction has been, or is to be, claimed under section 295-465 or 295-470.

Note: Those sections allow deductions for insurance premiums that have been paid, and for liability for future benefits.

(2) The *taxable component of the *superannuation lump sum includes an element taxed in the fund worked out as follows:

(a) first, work out the amount under the formula in subsection (3);

(b) next, reduce that amount (but not below zero) by the *tax free component (if any) of the superannuation lump sum.

(3) For the purposes of paragraph (2)(a), the formula is:

Amount of superannuation lump sum x (Service days / (Service days + Days to retirement))

days to retirement is the number of days from the day on which the deceased died to the deceased’s *last retirement day.

service days is the number of days in the *service period for the lump sum.

(4) The element untaxed in the fund of the *taxable component is the balance of the taxable component.

307-295 Superannuation benefits from public sector superannuation schemes may include untaxed element

(1) This section applies to a *superannuation benefit that is paid from a *public sector superannuation scheme that is not a *constitutionally protected fund.

(2) If the *superannuation benefit paid is not sourced to any extent from contributions made into a *superannuation fund or earnings on such contributions, the *taxable component of the superannuation benefit consists wholly of an element untaxed in the fund .

(3) If the benefit is a *superannuation lump sum that is partly sourced from contributions made into a *superannuation fund or earnings on such contributions, the element taxed in the fund and the element untaxed in the fund of the *taxable component of the benefit are worked out as follows:

Method statement

Step 1. Subdivide the *superannuation lump sum (the original benefit ) into 2 notional superannuation lump sums as follows:

(a) the amount sourced from contributions made into a *superannuation fund or earnings on such contributions (the fund benefit );

(b) the remainder of the lump sum (the non-fund benefit ).

Step 2. The fund benefit consists of an element taxed in the fund , an element untaxed in the fund , or both, as worked out under this Subdivision.

Step 3. The non-fund benefit consists wholly of an element untaxed in the fund .

Step 4. The element taxed in the fund of the original benefit equals the element taxed in the fund of the fund benefit.

Step 5. The element untaxed in the fund of the original benefit is the sum of the elements untaxed in the fund worked out under steps 2 and 3.

Subdivision 307-F - Low rate cap and untaxed plan cap amounts

Table of sections

307-345 Low rate cap amount

307-350 Untaxed plan cap amount

307-345 Low rate cap amount

Starting amount

(1) Your low rate cap amount for the 2007-2008 income year is $140,000.

Note: However, if you became entitled to a rebate under the corresponding provision of the Income Tax Assessment Act 1936, see section 307-345 of the Income Tax (Transitional Provisions) Act 1997.

Reductions and increases

(2) If you receive one or more *superannuation member benefits that are *superannuation lump sums in an income year, reduce your low rate cap amount for the next income year (but not below zero) by the total of the amounts that:

(a) are included in your assessable income for the first year in respect of those lump sums; and

(b) are counted towards your entitlement to a *tax offset under subsection 301-20(2) or 301-105(4) for the first year.

(3) At the start of each income year after the 2007-2008 income year, increase your low rate cap amount by the amount (if any) by which the index amount for that income year exceeds the index amount for the previous income year.

(4) For the purposes of subsection (3), the index amount for the 2007-2008 income year is $140,000. The index amount is then indexed annually.

Note: Subdivision 960-M shows how to index amounts. However, annual indexation does not necessarily increase the index amount: see section 960-285.

307-350 Untaxed plan cap amount

(1) Your untaxed plan cap amount for a *superannuation plan at the start of the 2007-2008 income year is $1,000,000.

Reductions and increases

(2) If you receive one or more *superannuation member benefits including an *element untaxed in the fund from a *superannuation plan at a time, reduce your untaxed plan cap amount just after that time:

(a) if the total of the elements untaxed in the fund falls short of your *untaxed plan cap amount at that time - by the amount of the benefit or of the total of the benefits; or

(b) otherwise - to nil.

(3) At the start of each income year after the 2007-2008 income year,increase your untaxed plan cap amount for the *superannuation plan by the amount (if any) by which the index amount for that income year exceeds the index amount for the previous income year.

(4) For the purposes of subsection (3), the index amount for the 2007-2008 income year is $1,000,000. The index amount is then indexed annually.

Note: Subdivision 960-M shows how to index amounts. However, annual indexation does not necessarily increase the index amount: see section 960-285.

Subdivision 307-G - Other concepts

Table of sections

307-400 Meaning of service period for a superannuation lump sum

307-400 Meaning of service period for a superannuation lump sum

(1) The service period for a *superannuation lump sum consists of each day that is in the period worked out under the table or a period covered by subsection (2).

(2) The service period for the *superannuation lump sum (the later lump sum ) also includes each day that is in the *service period for an earlier superannuation lump sum if some or all of the later lump sum is attributable, directly or indirectly, to some or all of the earlier lump sum through the payment of one or more *roll-over superannuation benefits.

2   Application

(1) The amendment made by this Part of this Schedule applies to the 2007-2008 income year and later years.

(2) Despite subitem (1), Division 292 of the Income Tax Assessment Act 1997 inserted by this Part of this Schedule applies to the 2007-2008 financial year and later years.

Note: For transitional rules about the application of Division 292 and related provisions in the period from 10 May 2006 to 30 June 2007, see section 292-80 of the Income Tax (Transitional Provisions) Act 1997.

(3) Despite subitem (1), Divisions 301 to 307 of the Income Tax Assessment Act 1997 inserted by this Part of this Schedule apply on and after 1 July 2007.

Part 2   Main consequential amendments

Income Tax Assessment Act 1936

3   Subsection 6(1) (at the end of the definition of assessment )

Add:

; or (h) the ascertainment of the amount of income tax payable on the no-TFN contributions income as defined by section 295-610 of the Income Tax Assessment Act 1997 (or that no tax is payable).

4   At the end of section 161AA

Add:

; and (d) for a company that is an RSA provider, or a trustee of a fund that is an eligible superannuation fund (as defined in section 267) in relation to the year of income:

(i) its no-TFN contributions income as defined by section 295-610 of the Income Tax Assessment Act 1997 (or that it has no no-TFN contributions income); and

(ii) the amount of the income tax payable on that income (or that no income tax is payable).

Income Tax Assessment Act 1997

5   Section 9-1 (table)

Repeal the table, substitute:

6   Subsection 9-5(1) (table)

Repeal the table, substitute:

7   Section 11-5 (table item headed "government")

Before:

Insert:

8   Section 50-25 (at the end of the table)

Add:

9   At the end of section 67-25

Add:

Tax offset in respect of no-TFN contributions income

(6) The *tax offset available under Subdivision 295-J is subject to the refundable tax offset rules.

10   Subdivision 118-G (heading)

Repeal the heading, substitute:

Subdivision 118-G - Venture capital: investment by superannuation funds for foreign residents

11   Paragraph 118-515(1)(b)

Omit “*foreign superannuation fund”, substitute “*superannuation fund for foreign residents”.

12   Section 118-520

Repeal the section, substitute:

118-520 Meaning of superannuation fund for foreign residents

(1) A fund is a superannuation fund for foreign residents at a time if:

(a) at that time, it is:

(i) an indefinitely continuing fund; and

(ii) a provident, benefit, superannuation or retirement fund; and

(b) it was established in a foreign country; and

(c) it was established, and is maintained at that time, only to provide benefits for individuals who are not Australian residents; and

(d) at that time, its central management and control is carried on outside Australia by entities none of whom is an Australian resident.

(2) However, a fund is not a superannuation fund for foreign residents if:

(a) an amount paid to the fund or set aside for the fund has been or can be deducted under this Act; or

(b) a *tax offset has been allowed or is allowable for such an amount.

13   Paragraph 320-15(1)(i)

Repeal the paragraph, substitute:

(i) amounts specified in agreements under section 295-260; and

14   At the end of section 320-15

Add:

(3) An amount included in assessable income under paragraph (1)(i) is included for the income year of the *life insurance company that includes the last day of the transferor’s income year to which the agreement referred to in section 295-260 relates.

15   After section 320-105

Insert:

320-107 Deductions for increased amount of lump sum death benefit

(1) A *life insurance company can deduct an amount under this section if:

(a) it pays a lump sum because of the death of a person to the trustee of the deceased’s estate or an individual who was a *spouse, former spouse or child of the deceased at the time of death or payment; and

(b) the payment is in relation to the commutation of, or is of the capital amount payable on the termination of, an *exempt life insurance policy or a life insurance policy covered by subparagraph (b)(i) of the definition of virtual PST life insurance policy in subsection 995-1(1) while the policy was held by the deceased by reason that the deceasedwould have been entitled to receive the *annuity concerned; and

(c) it increases the lump sum by an amount (the tax saving amount ) so that the amount of the lump sum is the amount that the company could have paid if no tax were payable on amounts included in its assessable income under Subdivision 320-B.

(2) The company can deduct the amount for the income year in which the lump sum is paid.

(3) The amount the company can deduct is:

Tax saving amount / Complying superannuation class rate

where:

complying superannuation class rate is the rate of tax imposed on the *complying superannuation class of the company’s taxable income for the income year.

(4) The amount the company can deduct for a sum paid because of the death of a person to the trustee of the deceased’s estate is so much of the subsection (3) amount as is appropriate having regard to the extent to which individuals referred to in paragraph (1)(a) can reasonably be expected to benefit from the estate.

16   At the end of subsection 960-100(1)

Add:

; (h) an *approved deposit fund.

17   Subsection 960-100(2)

Omit “or of a *superannuation fund”, substitute “, of a *superannuation fund or of an *approved deposit fund”.

Income Tax Rates Act 1986

18   At the end of Part III

Add:

29 Rate of tax on no-TFN contributions income

(1) This section sets the rate of tax payable:

(a) by a trustee of a complying superannuation fund in respect of the no-TFN contributions income of the fund; and

(b) by a trustee of a non-complying superannuation fund in respect of the no-TFN contributions income of the fund; and

(c) by a company (other than a life insurance company) that is an RSA provider in respect of no-TFN contributions income.

(2) The rate of tax is worked out in the following way:

(a) first, work out the maximum rate specified in column 3 of the table in Part I of Schedule 7 to this Act that applies for the year of income;

(b) next, add 1.5%;

(c) next, subtract the rate of tax:

(i) for a trustee of a complying superannuation fund - set out in paragraph 26(1)(a); or

(ii) for a trustee of a non-complying superannuation fund - set out in subsection 26(2); or

(iii) for a company (other than a life insurance company) that is an RSA provider - set out in paragraph 23(4BA)(a).

Taxation Administration Act 1953

19   Subsection 10-5(1) in Schedule 1 (after table item 22A)

Insert:

20   After Subdivision 12-FA of Division 12 of Part 2-4 in Schedule 1

Insert:

Subdivision 12-FAA - Excess untaxed roll-over amount

Table of sections

12-312 Untaxed roll-over superannuation benefits

12-313 Limits on amount withheld under this Subdivision

12-312 Untaxed roll-over superannuation benefits

An entity must withhold an amount from an *excess untaxed roll-over amount it pays to an entity.

Note: An excess untaxed roll-over amount is an amount that may form part of a roll-over superannuation benefit that includes an element untaxed in the fund: see section 306-15 of the Income Tax Assessment Act 1997.

12-313 Limits on amount withheld under this Subdivision

This Subdivision does not require an entity:

(a) to withhold an amount from an *excess untaxed roll-over amount if no *withholding tax is payable on the amount; or

(b) to withhold from an excess untaxed roll-over amount more than the withholding tax payable on the amount (reduced by each amount already withheld from the excess untaxed roll-over amount under this Subdivision).

Note: Section 306-15 of the Income Tax Assessment Act 1997 deals with liability to this form of withholding tax.

21   Paragraph 45-287(4)(a) in Schedule 1

Omit “*foreign superannuation fund”, substitute “*superannuation fund for foreign residents”.

22   Paragraph 45-287(4)(b) in Schedule 1

Omit “foreign superannuation fund”, substitute “superannuation fund for foreign residents”.

23   At the end of Division 288 of Part 4-25 in Schedule 1

288-90 Failing to give release authority for excess non-concessional contributions tax

A person to whom the Commissioner has given a release authority in accordance with paragraph 292-405(1)(b) of the Income Tax Assessment Act 1997 and who fails to comply with subsection 292-410(2) of that Act in relation to the release authority is liable to an administrative penalty of 20 penalty units.

288-95 Failing to comply etc. with release authority

(1) A *superannuation provider that has been given a release authority in accordance with section 292-410 of the Income Tax Assessment Act 1997 and that fails to comply with subsection 292-415(1) of that Act is liable to an administrative penalty of 20 penalty units.

(2) A *superannuation provider that has been given a transitional release authority in accordance with section 292-80B of the Income Tax (Transitional Provisions) Act 1997 and that fails to comply with subsection 292-80C(1) of that Act is liable to an administrative penalty of 20 penalty units.

288-100 Excess money paid under release authority

A person is liable for an administrative penalty of 20 penalty units if:

(a) the person gives one or more *superannuation providers a release authority in accordance with:

(i) section 292-410 of the Income Tax Assessment Act 1997; or

(ii) section 292-80B of the Income Tax (Transitional Provisions) Act 1997; and

(b) the total of the amounts paid by the superannuation provider or providers to the person and the Commissioner as a result of being given the release authority exceeds the amount required to be paid in respect of the release authority under:

(i) if subparagraph (a)(i) applies - subsection 292-415(1) of the Income Tax Assessment Act 1997; or

(ii) if subparagraph (a)(ii) applies - section 292-80C of the Income Tax (Transitional Provisions) Act 1997.

288-105 Superannuation provider to calculate crystallised pre-July 83 amount of superannuation interest by 30 June 2008

(1) An entity is liable to an administrative penalty of 5 penalty units if:

(a) the entity is the *superannuation provider in relation to a *superannuation plan (other than a *constitutionally protected fund) on 30 June 2008; and

(b) the entity has not ensured that the crystallised pre-July 83 amount in relation to each superannuation interest in the plan has been calculated on or before that day.

(2) For the purpose of paragraph (1)(b), disregard a *superannuation interest unless the *element taxed in the fund of the *taxable component of the interest exceeds nil just before 1 July 2007.

(3) For the purpose of paragraph (1)(b), disregard a *superannuation interest that supported a *superannuation income stream just before 1 July 2007.

24   Application

(1) The amendments made by this Part of this Schedule apply to the 2007-2008 income year and later years.

(2) Despite subitem (1), the following apply on and after 1 July 2007:

(a) the amendments made by items 19 and 20 of this Schedule;

(b) section 288-105 of the Taxation Administration Act 1953 inserted by item 23 of this Schedule.

(3) Despite subitem (1), sections 288-90, 288-95 and 288-100 of the Taxation Administration Act 1953 inserted by item 23 of this Schedule apply to the 2007-2008 financial year and later years.

Part 3   Main transitional amendments

Income Tax (Transitional Provisions) Act 1997

25   After Part 3-6

Insert:

Part 3-30 - Superannuation

Division 290 - Contributions

Table of sections

290-10 Directed termination payments not deductible etc.

290-10 Directed termination payments not deductible etc.

Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82-10F).

Division 292 - Excess contributions tax

Table of sections

292-20 Concessional contributions cap for a financial year

292-25 Excess directed termination payments included in concessional contributions

292-80 Application of excess non-concessional contributions tax from 10 May 2006 to 1 July 2007

292-80A Transitional release authority

292-80B Giving a transitional release authority to a superannuation provider

292-80C Superannuation provider given transitional release authority must pay amount

292-20 Concessional contributions cap for a financial year

(1) This section applies if:

(a) you have excess concessional contributions for a financial year that:

(i) begins on or after 1 July 2007; and

(ii) ends before 1 July 2012; and

(b) you are 50 years or over on the last day of that financial year.

(2) Despite section 292-20 of the Income Tax Assessment Act 1997, your concessional contributions cap for that financial year is $100,000.

Note: This amount is not indexed.

(3) Subsection (2) does not apply for the purposes of subsection 292-85(2) of that Act.

292-25 Excess directed termination payments included in concessional contributions

(1) A directed termination payment (within the meaning of section 82-10F) made in a financial year on behalf of you is not included in your concessional contributions (see section 292-25 of the Income Tax Assessment Act 1997) for the financial year, to the extent that it does not exceed the amount mentioned in subsection (2).

(2) The amount is $1,000,000, reduced by every transitional termination payment (within the meaning of section 82-10)made to you during the period:

(a) starting on 1 July 2007; and

(b) ending just before the directed termination payment was made.

292-80 Application of excess non-concessional contributions tax from 10 May 2006 to 1 July 2007

(1) The object of this section is to apply (with modifications) provisions relating to excess non-concessional contributions tax in respect of certain contributions made during the period that:

(a) begins on 10 May 2006; and

(b) ends just before 1 July 2007.

(2) The provisions are as follows:

(a) Subdivision 292-C of the Income Tax Assessment Act 1997 (excess non-concessional contributions tax);

(b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision;

(c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision.

Example: Section 390-65 in Schedule 1 to the Taxation Administration Act 1953.

(3) Those provisions apply in relation to that period, and do so as if:

(a) that period were the 2006-2007 financial year; and

(b) the amount of a person’s non-concessional contributions for that financial year:

(i) did not include the amount of the person’s excess concessional contributions for that financial year; and

(ii) if subsection (6) applies - included the amount mentioned in that subsection; and

(c) the person’s non-concessional contributions cap for that financial year were $1,000,000; and

(d) subsections 292-85(3) and (4) of the Income Tax Assessment Act 1997 were omitted; and

(e) the person’s CGT cap amount at the start of that financial year were $1,000,000; and

(f) paragraph 292-95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and

(g) paragraph 292-100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and

(h) contributions made during that period that are covered under section 292-100 of that Act reduce the person’s CGT cap amount for the 2007-2008 financial year in accordance with subsection 292-105(2) of that Act (and despite subsection (1) of that section); and

(i) if the conditions in subsection (4) are satisfied - the person’s excess non-concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and

(j) the reference in subsection 307-220(1) of that Act to 30 June 2007 were a reference to 9 May 2006.

(4) For the purposes of paragraph (3)(i), the conditions are:

(a) the person gives the Commissioner an application under subsection 292-80A(1) before 1 July 2007; and

(b) the Commissioner gives the person a transitional release authority under subsection 292-80A(2) in response to the application; and

(c) the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292-80B within 21 days after the date of the release authority; and

(d) the superannuation provider pays the person the amount required under section 292-80C in relation to the transitional release authority.

(5) Subsection (6) applies if:

(a) contributions are made in respect of a person (the first person ) in either or both of the following periods:

(i) 10 May 2006 to 30 June 2006;

(ii) 1 July 2006 to 30 June 2007; and

(b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act).

(6) The amount to be included in the first person’s amount of non-concessional contributions under subparagraph (3)(b)(ii) is the sum of:

(a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and

(b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made.

292-80A Transitional release authority

(1) A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007.

(2) The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292-80(3)(b)(i), the person would have excess non-concessional contributions for the financial year mentioned in paragraph 292-80(3)(a).

(3) The transitional release authority must:

(a) state the amount of excess non-concessional contributions mentioned in subsection (2); and

(b) be dated; and

(c) contain any other information that the Commissioner considers relevant.

(4) For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out:

(a) whether the person has excess non-concessional contributions as mentioned in subsection (2); and

(b) the amount of those excess non-concessional contributions.

292-80B Giving a transitional release authority to a superannuation provider

The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person within 21 days after the date of the release authority.

292-80C Superannuation provider given transitional release authority must pay amount

(1) A superannuation provider that has been given a transitional release authority in accordance with section 292-80B must pay to the person within 30 days after receiving the release authority the least of the following amounts:

(a) if the person requests the provider in writing to pay a specified amountin relation to the release authority - that amount;

(b) the amount of excess non-concessional contributions stated in the release authority;

(c) the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person.

Note 1: Section 288-95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection.

Note 2: Section 288-100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority.

Note 3: For reporting obligations on the superannuation provider in these circumstances, see section 390-65 in Schedule 1 to the Taxation Administration Act 1953.

Note 4: For the taxation treatment of the payment, see section 304-15 of the Income Tax Assessment Act 1997.

(2) The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person.

(3) Section 307-125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section.

Division 295 - Taxation of superannuation entities

Table of Subdivisions

295-I No-TFN contributions income

Subdivision 295-I - No-TFN contributions income

Table of sections

295-610 No-TFN contributions income

295-610 No-TFN contributions income

Subdivisions 295-I (no-TFN contributions) and 295-J (Tax offset for no-TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006-2007 income year ends on a day (the end day ) after 1 July 2007 as if:

(a) the period starting on 1 July 2007 and ending on the end day were part of the entity’s 2007-2008 income year; and

(b) the entity’s no-TFN contributions income for the entity’s 2007-2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007-2008 income year if the contributions concerned had been made in the entity’s 2007-2008 income year.

Division 301 - Superannuation member benefits paid from complying plans etc.

Table of sections

301-85 Extended meaning of disability superannuation benefit for superannuation income stream

301-85 Extended meaning of disability superannuation benefit for superannuation income stream

For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936.

Division 302 - Superannuation death benefits paid from complying plans etc.

Table of sections

302-195 Extended meaning of death benefits dependant for superannuation income stream

302-195 Extended meaning of death benefits dependant for superannuation income stream

For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if:

(a) the benefit is a superannuation death benefit; and

(b) just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936.

Division 307 - Key concepts relating to superannuation benefits

Table of sections

307-125 Treatment of tax free component of existing pension payments etc.

307-345 Low rate component - Effect of rebate under the Income Tax Assessment Act 1936

307-125 Treatment of tax free component of existing pension payments etc.

(1) This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007.

(2) Despite subsection 307-125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows:

(a) first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007);

(b) next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits.

The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit.

(3) Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened:

(a) the superannuation income stream has been wholly or partially commuted;

(b) the holder of the superannuation interest has died, if:

(i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or

(ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007 - all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day;

(c) the holder of the superannuation interest turns 60, if:

(i) none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or

(ii) where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007 - all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day.

Continuing payments of superannuation income stream after subsection (3) event

(4) If subsection (2) does not apply to the payment of a superannuation income stream benefit because of subsection (3):

(a) treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307-125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and

(b) work out the tax free component of the superannuation interest for the purposes of section 307-125 of the Income Tax Assessment Act 1997 under subsection (6).

(5) For the purposes of subsection (4), the time is:

(a) the time just before the event mentioned in subsection (3) happens; or

(b) if there are 2 or more such events - the time just before the earliest of those events happens.

(6) For the purposes of paragraph (4)(b), work out the tax free component of the superannuation interest as follows:

(a) first, assume that:

(i) an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and

(ii) the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time;

(b) next, work out the unused undeducted purchase price (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this item) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007;

(c) next, work out the pre-July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this item) of the eligible termination payment.

The tax free component is equal to the sum of the amounts worked out under paragraphs (b) and (c).

(7) For the purposes of paragraph (6)(c), disregard the *value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment.

Commutation of superannuation income stream

(8) If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307-125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as:

(a) the time just before the commutation; or

(b) if 1 or more other events mentioned in subsection (3) happened before the commutation - the time just before the earliest of those events happens.

307-345 Low rate component - Effect of rebate under the Income Tax Assessment Act 1936

If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007-2008 income year is, despite subsection 307-345(1), the total of:

(a) your closing balance for the 2006-2007 income year (worked out under subsection 159SF(2) of that Act); and

(b) the amount by which $140,000 exceeds the upper limit for the 2006-2007 income year (worked out under section 159SG of that Act).

Part 4   TFN consequentials for Division 295

Income Tax Assessment Act 1936

26   Subsection 202DH(2)

After “In this section”, insert “and in section 202DHA”.

27   After section 202DH

Insert:

202DHA Tax file number quoted for Division 3 purposes taken to have been quoted for superannuation purposes

If:

(a) a person has made a TFN declaration in relation to a payer; and

(b) the person is a beneficiary of an eligible superannuation entity or of a regulated exempt public sector superannuation scheme; and

(c) the payer makes a contribution to the person’s eligible superannuation entity or regulated exempt public sector superannuation scheme for the benefit of the person;

the person is taken to have authorised the payer to inform the trustee of the superannuation entity or scheme of the person’s tax file number.

Superannuation Industry (Supervision) Act 1993

28   Paragraph 6(1)(a)

After “paragraph (e)”, insert “or (g)”.

29   Subparagraph 6(1)(a)(xii)

After “Part 25A”, insert “(except Division 1)”.

30   Subparagraph 6(1)(e)(v)

Omit “, 24 and 25A”, substitute “and 24, and Divisions 2, 3, 4 and 5 of Part 25A”.

31   At the end of subsection 6(1)

Add:

; and (g) the Commissioner of Taxation also has the general administration of Divisions 1 and 3A of Part 25A.

32   Paragraph 299C(1)(a)

Repeal the paragraph, substitute:

(a) an employee:

(i) quotes or first quotes his or her tax file number after the commencement of this section to his or her employer in connection with the operation or the possible future operation of this Act and the other Superannuation Acts; or

(ii) quotes or first quotes his or her tax file number on or after 1 July 2007 to his or her employer in connection with the operation of Division 3 of Part VA of the Income Tax Assessment Act 1936; and

33   At the end of subsection 299C(1)

Add:

Note: Division 3 of Part VA of the Income Tax Assessment Act 1936 deals with quotation of tax file numbers by recipients of eligible PAYG payments.

34   Paragraph 299P(a)

After “the Regulator”, insert “or in the approved form (as defined by section 388-50 in Schedule 1 to the Taxation Administration Act 1953)”.

35   After Division 3 of Part 25A

Insert:

Division 3A - Incorrect quotation of tax file number

299TA Effect of mistaken quotation of tax file number

(1) The Commissioner may give the trustee of an eligible superannuation entity or a regulated exempt public sector superannuation scheme notice of the tax file number of a beneficiary of the entity or scheme if:

(a) the trustee has made a record of a number (the recorded TFN ) the trustee believes to be the tax file number of the beneficiary; and

(b) the Commissioner is satisfied that the recorded TFN:

(i) has been cancelled or withdrawn since it was quoted; or

(ii) is otherwise wrong; and

(c) the Commissioner is satisfied that the beneficiary has a tax file number.

(2) The beneficiary is taken to have quoted his or her tax file number to the trustee in connection with the operation or the possible future operation of this Act and the other Superannuation Acts at a time if:

(a) the Commissioner gives the trustee of an eligible superannuation entity or a regulated exempt public sector superannuation scheme a notice under subsection (1); and

(b) had the recorded TFN been the tax file number of the beneficiary, the beneficiary would have quoted his or her tax file number to the trustee in that way at the time.

299TB Effect of invalid quotation of tax file number

(1) The Commissioner may give the trustee of an eligible superannuation entity or a regulated exempt public sector superannuation scheme a notice under subsection (2) if:

(a) the trustee has made a record of a number (the recorded TFN ) the trustee believes to be the tax file number of the beneficiary; and

(b) the Commissioner is satisfied that the recorded TFN:

(i) has been cancelled or withdrawn since it was quoted; or

(ii) is otherwise wrong; and

(c) the Commissioner is not satisfied that the beneficiary has a tax file number.

(2) The notice must identify the beneficiary and state that the Commissioner is not satisfied that the beneficiary has a tax file number.

(3) If the Commissioner gives a notice under subsection (2), the Commissioner must give a copy of the notice to the beneficiary.

Taxation (Interest on Overpayments and Early Payments) Act 1983

36   After Part IIF

Insert:

Part IIG - Interest on certain amounts of tax on no-TFN contributions income of superannuation providers

8ZC Interpretation

Expressions used in this Part that are defined in the Income Tax Assessment Act 1997 have the same meanings as in that Act.

8ZD Entitlement to interest

(1) Interest is payable by the Commissioner to a superannuation provider in accordance with this Part on the amount set out in subsection (2) if:

(a) an individual quoted his or her tax file number to his or her employer at a time before the end of an income year (the past year ); and

(b) the employer was required by section 299C of the Superannuation Industry (Supervision) Act 1993 to inform the superannuation provider of the individual’s tax file number by the end of the past year, but did not; and

(c) as a result, a contribution was an amount of no-TFN contributions income of the superannuation provider of the past year; and

(d) an amount of tax (the interest-bearing tax ) payable in respect of that no-TFN contributions income counts towards the tax offset under Subdivision 295-J of the Income Tax Assessment Act 1997 for an income year (the current year ) for the superannuation provider; and

(e) the tax offset under that Subdivision is applied in making an assessment in respect of the superannuation provider for the current year.

(2) The interest is payable on each amount of interest-bearing tax.

8ZE Period of interest

The interest is payable for the period that:

(a) started on the later of the following days:

(i) the day on which the amount of interest-bearing tax was paid;

(ii) the day by which the amount of interest-bearing tax was required to be paid; and

(b) ends on the day on which the assessment is made.

8ZF Rate of interest

Interest under this Part is payable at the base interest rate (within the meaning of the Tax Act).

Note: For the meaning of base interest rate see section 8AAD of the Taxation Administration Act 1953.

37   Application

The amendments made by this Part of this Schedule apply to the 2007-2008 income year and later years.

Schedule 2   Employment termination payments

Part 1   Main amendments

Income Tax Assessment Act 1997

1   After Part 2-25

Insert:

Part 2-40 - Rules affecting employees and other taxpayers receiving PAYG withholding payments

Division 80 - General rules

Table of Subdivisions

Guide to Division 80

Guide to Division 80

80-1 What this Division is about

This Division sets out rules that apply throughout the Part. The rules are about holding an office, the termination of employment, the transfer of property and receiving and making payments.

Table of sections

Operative provisions

80-5 Holding of an office

80-10 Application to the termination of employment

80-15 Transfer of property

80-20 Payments for your benefit or at your direction or request

Operative provisions

80-5 Holding of an office

If a person holds (or has held) an office, this Part applies to the person in the same way as it would apply if the person were (or had been) employed.

80-10 Application to the termination of employment

For the purposes of this Part, treat the termination of employment as including:

(a) retirement from employment; and

(b) the cessation of employment because of death.

80-15 Transfer of property

(1) Any of the following payments covered by this Part (but no others covered by this Part) can include a transfer of property:

(a) an *employment termination payment;

(b) a *genuine redundancy payment;

(c) an *early retirement scheme payment;

(d) a payment covered by Subdivision 83-D (Foreign termination payments);

(e) a payment that would be an employment termination payment but for paragraph 82-130(1)(b) (see Subdivision 83-E).

Note: An unused annual leave payment or an unused long service leave payment cannot include a transfer of property.

(2) If it does, the amount of the payment includes the *market value of the property.

(3) The *market value is reduced by the value of any consideration given for the transfer of the property.

80-20 Payments for your benefit or at your direction or request

(1) This section applies for the purposes of:

(a) determining whether Division 82 or 83 applies to a payment; and

(b) determining whether a payment mentioned in Division 82 or 83 is made to you, or received by you.

(2) A payment is treated as being made to you, or received by you, if it is made:

(a) for your benefit; or

(b) to another person or to an entity at your direction or request.

Division 82 - Employment termination payments

Table of Subdivisions

Guide to Division 82

82-A Employment termination payments: life benefits

82-B Employment termination payments: death benefits

82-C Key concepts

Guide to Division 82

82-1 What this Division is about

This Division tells you how employment termination payments are treated for the purpose of income tax.

Subdivision 82-A - Employment termination payments: life benefits

Guide to Subdivision 82-A

82-5 What this Subdivision is about

If you receive a life benefit termination payment, part of the payment may be tax free (the tax free component).

You are entitled to a tax offset on the remaining part of the payment (the taxable component), subject to limitations.

The extent of your entitlement to the offset depends on your age in the year you receive the offset, on the total amount of payments you receive in the same year, and on the total amount of payments you receive in consequence of the same employment termination.

Table of sections

Operative provisions

82-10 Taxation of life benefit termination payments

Operative provisions

82-10 Taxation of life benefit termination payments

Tax free component

(1) The *tax free component of a *life benefit termination payment you receive is not assessable income and is not *exempt income.

Taxable component

(2) The *taxable component of the payment is assessable income.

(3) You are entitled to a *tax offset that ensures that the rate of income tax on the amount mentioned in subsection (4) does not exceed:

(a) if you are your *preservation age or older on the last day of the income year in which you receive the payment - 15%; or

(b) otherwise - 30%.

Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

(4) The amount is so much of the *taxable component of the payment as does not exceed the lesser of:

(a) the *ETP cap amount, reduced (but not below zero) by the amount worked out under this subsection for each *life benefit termination payment you have received earlier in the income year; and

(b) the ETP cap amount, reduced (but not below zero) by the amount worked out under this subsection for each life benefit termination payment you have received earlier in consequence of the same employment termination, whether in the income year or an earlier income year.

Note 1: For the ETP cap amount, see section 82-160.

Note 2: If you have also received a death benefit termination payment in the same income year, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the death benefit termination payment (under section 82-65 or 82-70).

Note 3: Certain other life benefit termination payments made before 1 July 2012 may be treated as earlier payments under paragraph (4)(b): see section 82-10H of the Income Tax (Transitional Provisions) Act 1997.

Subdivision 82-B - Employment termination payments: death benefits

Guide to Subdivision 82-B

82-60 What this Subdivision is about

If you receive a death benefit termination payment after the death of a person, part of the payment may be tax free (the tax free component).

You are entitled to a tax offset on the remaining part of the payment (the taxable component), subject to limitations.

The extent of your entitlement to the offset depends on whether or not you were a death benefits dependant of the deceased, and on the total amount of payments you receive in consequence of the same employment termination.

If a death benefit termination payment is payable to the trustee of the estate of the deceased for the benefit of another person, the payment is taxed in the hands of the trustee in the same way as it would be taxed if it had been paid directly to the other person.

Table of sections

Operative provisions

82-65 Death benefits for dependants

82-70 Death benefits for non-dependants

82-75 Death benefits paid to trustee of deceased estate

Operative provisions

82-65 Death benefits for dependants

Tax free component

(1) The *tax free component of a *death benefit termination payment that you receive after the death of a person of whom you are a *death benefits dependant is not assessable income and is not *exempt income.

Taxable component

(2) If you receive a *death benefit termination payment after the death of a person of whom you are a *death benefits dependant:

(a) the part of the *taxable component of the payment mentioned in subsection (3) is not assessable income and is not *exempt income; and

(b) the remainder of the taxable component (if any) of the payment is assessable income.

Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

(3) The amount is so much of the *taxable component of the payment as does not exceed the *ETP cap amount.

Note: For the ETP cap amount, see section 82-160.

(4) The *ETP cap amount is reduced (but not below zero) by the amount worked out under subsection (3) for each *death benefit termination payment (if any) you have received earlier in consequence of the same employment termination, whether in the income year or an earlier income year.

Note 1: See subsection 82-75(2) for the tax treatment of any amount by which you may have benefited from an employment termination payment to the trustee of the estate of the deceased.

Note 2: If you have also received a life benefit termination payment in the same income year, your entitlement to a tax concession under this section is not affected by your entitlement (if any) to an offset for the life benefit termination payment (under section 82-10).

82-70 Death benefits for non-dependants

Tax free component

(1) The *tax free component of a *death benefit termination payment that you receive after the death of a person of whom you are not a *death benefits dependant is not assessable income and is not *exempt income.

Taxable component

(2) If you receive a *death benefit termination payment after the death of a person of whom you are not a *death benefits dependant, the *taxable component of the payment is assessable income.

(3) You are entitled to a *tax offset that ensures that the rate of income tax on the amount mentioned in subsection (4) does not exceed 30%.

Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

(4) The amount is so much of the *taxable component of the payment as does not exceed the *ETP cap amount.

Note: For the ETP cap amount, see section 82-160.

(5) The *ETP cap amount is reduced (but not below zero) by the amount worked out under subsection (4) for each *death benefit termination payment (if any) you have received earlier in consequence of the same employment termination, whether in the income year or an earlier income year.

Note 1: See subsection 82-75(3) for the tax treatment of any amount by which you may have benefited from an employment termination payment to the trustee of the estate of the deceased.

Note 2: If you have also received a life benefit termination payment in the same income year, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to an offset for the life benefit termination payment (under section 82-10).

82-75 Death benefits paid to trustee of deceased estate

(1) This section applies to you if:

(a) you are the trustee of a deceased estate; and

(b) a *death benefit termination payment is made to you in your capacity as trustee.

Note: See also subsection 101A(3) of the Income Tax Assessment Act 1936.

Dependants of deceased benefit from payment

(2) To the extent that 1 or more beneficiaries of the estate who were *death benefits dependants of the deceased have benefited, or may be expected to benefit, from the payment:

(a) the payment is treated as if it had been made to you as a person who was a death benefits dependant of the deceased; and

(b) the payment is taken to be income to which no beneficiary is presently entitled.

Note: Section 82-65 deals with the taxation of employment termination payments made to persons who are death benefits dependants of deceased persons.

Non-dependants of deceased benefit from payment

(3) To the extent that 1 or more beneficiaries of the estate who were not *death benefits dependants of the deceased have benefited, or may be expected to benefit, from the payment:

(a) the payment is treated as if it had been made to you as a person who was not a death benefits dependant of the deceased; and

(b) the payment is taken to be income to which no beneficiary is presently entitled.

Note: Section 82-70 deals with the taxation of employment termination payments made to persons who are not death benefits dependants of deceased persons.

Subdivision 82-C - Key concepts

Guide to Subdivision 82-C

82-125 What this Subdivision is about

This Subdivision defines an employment termination payment as a payment made in consequence of the termination of a person’s employment that is received no later than 12 months after the termination (though the 12 month restriction is relaxed in some circumstances).

An employment termination payment can be a life benefit termination payment (received by the person whose employment is terminated) or a death benefit termination payment (received by another person after the death of a person whose employment is terminated).

Certain types of payments are declared not to be employment termination payments.

Various other terms used in describing the taxation treatment of employment termination payments are defined in the Subdivision.

Table of sections

Operative provisions

82-130 What is an employment termination payment ?

82-135 Payments that are not employment termination payments

82-140 Tax free component of an employment termination payment

82-145 Taxable component of an employment termination payment

82-150 What is an invalidity segment of an employment termination payment?

82-155 What is a pre-July 83 segment of an employment termination payment?

82-160 What is the ETP cap amount ?

Operative provisions

82-130 What is an employment termination payment ?

(1) A payment is an employment termination payment if:

(a) it is received by you:

(i) in consequence of the termination of your employment; or

(ii) after another person’s death, in consequence of the termination of the other person’s employment; and

(b) it is received no later than 12 months after that termination (but see subsection (4)); and

(c) it is not a payment mentioned in section 82-135.

Note 1: If a payment would be an employment termination payment but for paragraph (b), see subsection (4) and section 83-295.

Note 2: The holding of an office is treated as employment for this Part: see section 80-5. Also, the termination of employment is treated as including the termination of employment by retirement or by death: see section 80-10.

Types of employment termination payment

(2) A life benefit termination payment is an *employment termination payment to which subparagraph (1)(a)(i) applies.

(3) A death benefit termination payment is an *employment termination payment to which subparagraph (1)(a)(ii) applies.

Exemption from 12 month rule

(4) Paragraph (1)(b) does not apply to you if:

(a) you are covered by a determination under subsection (5) or (7); or

(b) the payment is a *genuine redundancy payment or an *early retirement scheme payment.

Note: The part of a genuine redundancy payment or an early retirement scheme payment worked out under section 83-170 is not an employment termination payment: see section 82-135.

(5) The Commissioner may determine, in writing, that paragraph (1)(b) does not apply to you if the Commissioner considers the time between the employment termination and the payment to be reasonable, having regard to the following:

(a) the circumstances of the employment termination, including any dispute in relation to the termination;

(b) the circumstances of the payment;

(c) the circumstances of the person making the payment;

(d) any other relevant circumstances.

(6) A determination under subsection (5) is not a legislative instrument.

(7) The Commissioner may, by legislative instrument, determine that paragraph (1)(b) does not apply to either or both of the following, as specified in the determination:

(a) a class of payments;

(b) a class of recipients of payments.

(8) A determination under subsection (7) may provide for paragraph (1)(b) not to apply in circumstances relating to any (or all) of the following, as specified in the determination:

(a) a class of employment termination (including a class described by reference to disputes of a specified type);

(b) a class of payments;

(c) a class of persons making payments;

(d) the period after the employment termination until payment is received;

(e) any other relevant circumstances.

82-135 Payments that are not employment termination payments

The following payments you receive are not employment termination payments :

(a) a *superannuation benefit (see Divisions 301 to 307);

(b) a payment of a pension or an *annuity (whether or not the payment is a superannuation benefit); and

(c) an *unused annual leave payment (see Subdivision 83-A);

(d) an *unused long service leave payment (see Subdivision 83-B);

(e) the part of a *genuine redundancy payment or an *early retirement scheme payment worked out under section 83-170 (see Subdivision 83-C);

(f) a payment to which Subdivision 83-D (Foreign termination payments) applies;

(g) a payment that is an advance or a loan to you on terms and conditions that would apply if you and the payer were dealing at *arm’s length;

(h) a payment that is deemed to be a *dividend under paragraph 109(1)(d) of the Income Tax Assessment Act 1936 (which deals with excessive payments to shareholders, directors and *associates);

(i) a capital payment for, or in respect of, personal injury to you so far as the payment is reasonable having regard to the nature of the personal injury and its likely effect on your capacity to *derive income from personal exertion (within the meaning of the definition of income derived from personal exertion in subsection 6(1) of the Income Tax Assessment Act 1936);

(j) a capital payment for, or in respect of, a legally enforceable contract in restraint of trade by you so far as the payment is reasonable having regard to the nature and extent of the restraint;

(k) a payment:

(i) received by you, or to which you are entitled, as the result of the commutation of a pension payable from a *constitutionally protected fund; and

(ii) wholly applied in paying any superannuation contributions surcharge (as defined in section 37 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997);

(l) a payment:

(i) received by you, or to which you are entitled, as the result of the commutation of a pension payable by a superannuation provider (within the meaning of the Superannuation Contributions Tax (Assessment and Collection) Act 1997); and

(ii) wholly applied in paying any superannuation contributions surcharge (as defined in section 43 of that Act).

Note: For paragraph (e) - the remaining part of a genuine redundancy payment or an early retirement scheme payment (apart from the amount mentioned in the paragraph) is an employment termination payment if section 82-130 applies to that part.

82-140 Tax free component of an employment termination payment

The tax free component of an *employment termination payment is so much of the payment as consists of the following:

(a) the *invalidity segment of the payment;

(b) the *pre-July 83 segment of the payment.

82-145 Taxable component of an employment termination payment

The taxable component of an *employment termination payment is the amount of the payment less the *tax free component of the payment (see section 82-140).

82-150 What is an invalidity segment of an employment termination payment?

(1) An *employment termination payment includes an invalidity segment if:

(a) the payment was made to a person because he or she stops being *gainfully employed; and

(b) the person stopped being gainfully employed because he or she suffered from ill-health (whether physical or mental); and

(c) the gainful employment stopped before the person’s *last retirement day; and

(d) 2 legally qualified medical practitioners have certified that, because of the ill-health, it is unlikely that the person can ever be gainfully employed in capacity for which he or she is reasonably qualified because of education, experience or training.

(2) Work out the amount of the invalidity segment by applying the following formula:

Amount of employment termination payment x (Days to retirement / (Employment days + Days to retirement))

where:

days to retirement is the number of days from the day on which the person’s employment was terminated to the *last retirement day.

employment days is the number of days of employment to which the payment relates.

82-155 What is a pre-July 83 segment of an employment termination payment?

(1) An *employment termination payment includes a pre-July 83 segment if any of the employment to which the payment relates occurred before 1 July 1983.

(2) Work out the amount of the pre-July 83 segment as follows:

Step 1. Subtract the *invalidity segment (if any) from the *employment termination payment.

Step 2. Multiply the amount at step 1 by the fraction:

Number of days of employment to which the payment relates that occurered before 1 July 1983 / Total number of days of employment to which the payment relates

82-160 What is the ETP cap amount ?

The ETP cap amount for the 2007-2008 income year is $140,000. This amount is indexed annually.

Note 1: Subdivision 960-M shows how to index amounts. However, annual indexation does not necessarily increase the ETP cap amount: see section 960-285.

Note 2: The ETP cap amount may be reduced for the purpose of working out tax offsets for individual employment termination payments.

Division 83 - Other payments on termination of employment

Table of Subdivisions

Guide to Division 83

83-A Unused annual leave payments

83-B Unused long service leave payments

83-C Genuine redundancy payments and early retirement scheme payments

83-D Foreign termination payments

83-E Other payments

Guide to Division 83

83-1 What this Division is about

This Division sets out the taxation treatment for a variety of payments, other than employment termination payments, that are made in consequence of the termination of employment.

Subdivision 83-A - Unused annual leave payments

Guide to Subdivision 83-A

83-5 What this Subdivision is about

You are entitled to a tax offset for a payment that you receive in consequence of the termination of your employment that is for unused annual leave.

Table of sections

Operative provisions

83-10 Unused annual leave payment is assessable

83-15 Entitlement to tax offset

Operative provisions

83-10 Unused annual leave payment is assessable

Application - annual leave

(1) This section applies to leave ( annual leave ) of the following types (whether it is made available as an entitlement or as a privilege):

(a) leave ordinarily known as annual leave, including recreational leave and annual holidays;

(b) any other leave made available in circumstances similar to those in which the leave mentioned in paragraph (a) is ordinarily made available.

Unused annual leave payments

(2) Your assessable income includes an *unused annual leave payment that you receive.

(3) A payment that you receive in consequence of the termination of your employment is an unused annual leave payment if:

(a) it is for annual leave you have not used; or

(b) it is a bonus or other additional payment for annual leave you have not used; or

(c) it is for annual leave, or is a bonus or other additional payment for annual leave, to which you were not entitled just before the employment termination, but that would have been made available to you at a later time if it were not for the employment termination.

83-15 Entitlement to tax offset

You are entitled to a *tax offset to ensure that the rate of tax on an *unused annual leave payment does not exceed 30%, to the extent that:

(a) the payment was made in connection with a payment that includes, or consists of, any of the following:

(i) a *genuine redundancy payment;

(ii) an *early retirement scheme payment;

(iii) the *invalidity segment of an *employment termination payment or *superannuation benefit; or

(b) the payment was made in respect of employment before 18 August 1993.

Subdivision 83-B - Unused long service leave payments

Guide to Subdivision 83-B

83-65 What this Subdivision is about

You are entitled to a tax offset for a payment that you receive in consequence of the termination of your employment that is for unused long service leave.

Table of sections

General

83-70 Application - long service leave

83-75 Meaning of unused long service leave payment

83-80 Taxation of unused long service leave payments

83-85 Entitlement to tax offset

83-90 Meaning of pre-16/8/78 period , pre-18/8/93 period , post-17/8/93 period and long service leave employment period

Employment wholly full-time or wholly part-time

83-95 How to work out amount of payment attributable to each period

83-100 How to work out unused days of long service leave for each period

83-105 How to work out long service leave accrued in each period

Employment partly full-time and partly part-time

83-110 Leave accrued in pre-16/8/78, pre-18/8/93 and post-17/8/93 periods - employment full-time and part-time

Long service leave taken at less than full pay

83-115 Working out used days of long service leave if leave taken at less than full pay

General

83-70 Application - long service leave

This Subdivision applies to leave ( long service leave ) of the following types (whether it is made available as an entitlement or as a privilege), other than annual leave to which section 83-10 applies:

(a) leave ordinarily known as long service leave, including long leave, furlough and extended leave;

(b) any other leave made available in circumstances similar to those in which the leave mentioned in paragraph (a) is ordinarily made available;

(c) if your employer has entered into a *scheme or *arrangement for leave and, because of the existence and nature of the scheme or arrangement, the employer does not have to comply with the requirements of a law of the Commonwealth, or of a State or Territory, relating to leave mentioned in paragraph (a) or (b) - leave made available under the scheme or arrangement.

83-75 Meaning of unused long service leave payment

A payment that you receive in consequence of the termination of your employment is an unused long service leave payment if:

(a) it is for long service leave you have not used; or

(b) it is for long service leave to which you were not entitled just before the employment termination, but that would have been made available to you at a later time if it were not for the employment termination.

83-80 Taxation of unused long service leave payments

Assessable and tax-free parts of unused long service leave payments

(1) If you receive an *unused long service leave payment, your assessable income includes the part of the payment shown in this table:

(2) The remainder of that part (if any) of an *unused long service leave payment that is attributable to the *pre-16/8/78 period is not assessable income and is not *exempt income.

Note 1: If your employment was wholly full-time or wholly part-time during a period, see sections 83-95, 83-100 and 83-105 to work out the amount of an unused long service leave payment that is attributable to the period.

Note 2: If your employment was partly full-time and partly part-time during a period, see section 83-110 to work out the amount of an unused long service leave payment that is attributable to the period.

83-85 Entitlement to tax offset

(1) You are entitled to a *tax offset on an *unused long service leave payment that ensures that the rate of income tax on the amount of the payment mentioned in subsection (2) does not exceed 30%.

(2) The amount is the part of the *unused long service leave payment included in your assessable income under subsection 83-80(1):

(a) to the extent that it is attributable to the *pre-18/8/93 period; and

(b) to the extent that it is attributable to the *post-17/8/93 period, if the payment was made in connection with a payment that includes, or consists of, any of the following:

(i) a *genuine redundancy payment; or

(ii) an *early retirement scheme payment; or

(iii) an *invalidity segment of an *employment termination payment or a *superannuation benefit.

83-90 Meaning of pre-16/8/78 period , pre-18/8/93 period , post-17/8/93 period and long service leave employment period

(1)The pre-16/8/78 period consists of each day (if any) in your *long service leave employment period that occurred before 16 August 1978.

(2) The pre-18/8/93 period consists of each day (if any) in your *long service leave employment period to which the payment relates that occurred after 15 August 1978 and before 18 August 1993.

(3) The post-17/8/93 period consists of each day (if any) in your *long service leave employment period to which the payment relates that occurred after 17 August 1993.

(4) Your long service leave employment period , for a period of long service leave, is:

(a) the period of employment to which the long service leave relates; or

(b) if your entitlement to long service leave changes so that it accrues over a shorter period - the period that would apply under paragraph (a) assuming the change had not happened.

Employment wholly full-time or wholly part-time

83-95 How to work out amount of payment attributable to each period

(1) Work out how much of an *unused long service leave payment is attributable to a period as follows:

(a) for the *pre-18/8/93 period or to the *post-17/8/93 period - use the formula in subsection (2);

(b) for the *pre-16/8/78 period - subtract the sum of the amounts (if any) worked out for paragraph (a) for the other 2 periods from the total amount of the payment.

(2) For the *pre-18/8/93 period or the *post-17/8/93 period, the formula is:

Amount of payment x (Unused long service leave days in the relevant period / Total unused long service leave days)

where:

total unused long service leave days means the total number of unused days of long service leave in the *long service leave employment period for the payment.

unused long service leave days in the relevant period means the number of unused days of long service leave in the *pre-18/8/93 period or the *post-17/8/93 period (as applicable), worked out under section 83-100.

Note 1: For the meaning of unused days of long service leave , see section 83-100.

Note 2: Section 83-110 explains how to work out the period of unused long service leave if your employment was partly full-time and partly part-time during the period.

83-100 How to work out unused days of long service leave for each period

(1) The number of unused days of long service leave for each of the *pre-16/8/78 period, the *pre-18/8/93 period and the *post-17/8/93 period is the number of days of long service leave that accrued to you during that period less the number of days of long service leave that you used in the period.

Exception if days used exceed days accrued in the pre-18/8/93 period and the post-17/8/93 period

(2) To the extent that the number of days of long service leave that you used during the *pre-18/8/93 period or the *post-17/8/93 period exceeds the number of days of long service leave that accrued to you during the period, apply the excess days as shown in this table:

(3) The number of unused days of long service leave in each period is the number of days after applying the table.

Note: Section 83-115 explains how to work out the number of days of long service leave you are taken to have used if you took long service leave at less than the full pay rate.

83-105 How to work out long service leave accrued in each period

(1) Work out the number of days of long service leave that accrued to you during each part of your *long service leave employment period as follows:

(a) for the *pre-18/8/93 period or the *post-17/8/93 period - use the formula in subsection (2);

(b) for the *pre-16/8/78 period - subtract the sum of the number of days (if any) worked out under paragraph (a) for the other 2 periods from the total number of days of long service leave accrued to you during the long service leave employment period.

(2) For the *pre-18/8/93 period or the *post-17/8/93 period, the formula is:

Days of long service leave accrued during long service leave employment period x (Days in relevvant period / Days in long service leave employment period)

where:

relevant period means the *pre-18/8/93 period or the *post 17/8/93 period (as applicable).

How to treat fraction of day

(3) If long service leave accrued to you during the *pre-18/8/93 period and the *post-17/8/93 period but not during the *pre-16/8/78 period, and the number of days worked out under subsection (2) for the post-17/8/93 period includes a fraction, treat the fraction as having accrued during the pre-18/8/93 period.

(4) If long service leave accrued to you during all 3 periods and the number of days worked out under subsection (2) for the *post-17/8/93 period or the *pre-18/8/93 period includes a fraction, treat the fraction as having accrued during the *pre-16/8/78 period.

Employment partly full-time and partly part-time

83-110 Leave accrued in pre-16/8/78, pre-18/8/93 and post-17/8/93 periods - employment full-time and part-time

(1) This section applies if the *long service leave employment period for an *unused long service leave payment includes:

(a) 1 or more periods when you were employed on a full-time basis; and

(b) 1 or more periods when you were employed on a part-time basis.

(2) Work out how much of the payment is attributable to the period or periods when you were employed on a full-time basis (the full-time payment ) and how much to the period or periods when you were employed on a part-time basis (the part-time payment ).

(3) The amount of the payment that is attributable to each of the *pre-16/8/78 period, the *pre-18/8/93 period and the *post-17/8/93 period is the sum of the amounts worked out in accordance with sections 83-95, 83-100 and 83-105 that would be attributable to those periods if the full-time payment and the part-time payment were each *unused long service leave payments.

Long service leave taken at less than full pay

83-115 Working out used days of long service leave if leave taken at less than full pay

If you used days of long service leave at a rate of pay that is less than the rate to which you are entitled, the number of days of long service leave you are taken to have used (disregarding fractions of days) is as follows:

Actual days of long service leave x (Rate of pay at which leave was actually taken / Rate of pay to which you were entitled when taking leave)

Example: If you took 100 actual days of long service leave at a rate of pay of $30 per hour, while the rate of pay to which you were entitled when taking leave is $40 per hour, you are taken to have used 75 days of long service leave, worked out as follows:

100 actual days of long service leave x (30 / 40) = 75 days of long service leave you are taken to have used

Subdivision 83-C - Genuine redundancy payments and early retirement scheme payments

Guide to Subdivision 83-C

83-165 What this Subdivision is about

This Subdivision defines what are genuine redundancy payments and early retirement scheme payments.

If you receive a genuine redundancy payment or an early retirement scheme payment, you do not have to pay income tax on the payment so far as it does not exceed a certain amount worked out under this Subdivision.

A part of a genuine redundancy payment or an early retirement scheme payment that is not tax free under this Subdivision will normally be an employment termination payment.

Table of sections

Operative provisions

83-170 Tax-free treatment of genuine redundancy payments and early retirement scheme payments

83-175 What is a genuine redundancy payment ?

83-180 What is an early retirement scheme payment ?

Operative provisions

83-170 Tax-free treatment of genuine redundancy payments and early retirement scheme payments

(1) This section applies if you receive a *genuine redundancy payment or an *early retirement scheme payment.

Note: A payment cannot be both a genuine redundancy payment and an early retirement scheme payment, because of the nature of each of these types of payment: see sections 83-175 and 83-180.

(2) So much of the relevant payment as does not exceed the amount worked out under subsection (3) is not assessable income and is not *exempt income.

(3) Work out the amount using the formula:

Base amount + (Service amount x Years of service)

where:

base amount means:

(a) for the income year 2006-2007 - $6,783; and

(b) for a later income year - the amount mentioned in paragraph (a) indexed annually.

Note: Subdivision 960-M shows you how to index the base amount.

service amount means:

(a) for the income year 2006-2007 - $3,392; and

(b) for a later income year - the amount mentioned in paragraph (a) indexed annually.

Note: Subdivision 960-M shows you how to index the service amount.

years of service means the number of whole years in the period, or sum of periods, of employment to which the payment relates.

Note: The remaining part of a genuine redundancy payment or an early retirement scheme payment (apart from the amount mentioned in subsection (3)) is an employment termination payment if section 82-130 applies to that part.

83-175 What is a genuine redundancy payment ?

(1) A genuine redundancy payment is so much of a payment received by an employee who is dismissed from employment because the employee’s position is genuinely redundant as exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of the dismissal.

(2) A genuine redundancy payment must satisfy the following conditions:

(a) the employee is dismissed before the earlier of the following:

(i) the day he or she turned 65;

(ii) if the employee’s employment would have terminated when he or she reached a particular age or completed a particular period of service - the day he or she would reach the age or complete the period of service (as the case may be);

(b) if the dismissal was not at *arm’s length - the payment does not exceed the amount that could reasonably be expected to be made if the dismissal were at arm’s length;

(c) at the time of the dismissal, there was no *arrangement between the employee and the employer, or between the employer and another person, to employ the employee after the dismissal.

(3) However, a genuine redundancy payment does not include any part of a payment that was received by the employee in lieu of *superannuation benefits to which the employee may have become entitled at the time the payment was received or at a later time.

Payments not covered

(4) A payment is not a genuine redundancy payment if it is a payment mentioned in section 82-135 (apart from paragraph 82-135(e)).

Note: Paragraph 82-135(e) provides that the part of a genuine redundancy payment or an early retirement scheme payment worked out under section 83-170 is not an employment termination payment.

83-180 What is an early retirement scheme payment ?

(1) An early retirement scheme payment is so much of a payment received by an employee because the employee retires under an *early retirement scheme as exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of the retirement.

(2) An early retirement scheme payment must satisfy the following conditions:

(a) the employee retires before the earlier of the following:

(i) the day he or she turned 65;

(ii) if the employee’s employment would have terminated when he or she reached a particular age or completed a particular period of service - the day he or she would reach the age or complete the period of service (as the case may be);

(b) if the retirement is not at *arm’s length - the payment does not exceed the amount that could reasonably be expected to be made if the retirement were at arm’s length;

(c) at the time of the retirement, there was no *arrangement between the employee and the employer, or between the employer and another person, to employ the employee after the retirement.

(3) A scheme is an early retirement scheme if:

(a) all the employer’s employees who comprise such a class of employees as the Commissioner approves may participate in the scheme; and

(b) the employer’s purpose in implementing the scheme is to rationalise or re-organise the employer’s operations by making any change to the employer’s operations, or the nature of the work force, that the Commissioner approves; and

(c) before the scheme is implemented, the Commissioner, by written instrument, approves the scheme as an early retirement scheme for the purposes of this section.

(4) A scheme is also an early retirement scheme if:

(a) paragraph (3)(a) or (b) does not apply; and

(b) the Commissioner is satisfied that special circumstances exist in relation to the scheme that make it reasonable to approve the scheme; and

(c) before the scheme is implemented, the Commissioner, by written instrument, approves the scheme as an early retirement scheme for the purposes of this section.

(5) However, an early retirement scheme payment does not include any part of the *employment termination payment that was paid to the employee in lieu of *superannuation benefits to which the employee may have become entitled at the time the employment termination payment was made or at a later time.

Payments not covered

(6) A payment is not an early retirement scheme payment if it is a payment mentioned in section 82-135 (apart from paragraph 82-135(e)).

Note: Paragraph 82-135(e) provides that the part of a genuine redundancy payment or an early retirement scheme payment worked out under section 83-170 is not an employment termination payment.

Subdivision 83-D - Foreign termination payments

Guide to Subdivision 83-D

83-230 What this Subdivision is about

This Subdivision deals with termination payments that arise out of foreign employment.

These payments are not employment termination payments, and are tax free (except for amounts worked out under this Subdivision).

Table of sections

Operative provisions

83-235 Termination payments tax free - foreign resident period

83-240 Termination payments tax free - Australian resident period

Operative provisions

83-235 Termination payments tax free - foreign resident period

A payment received by you is not assessable income and is not *exempt income if:

(a) it was received in consequence of the termination of your employment in a foreign country; and

(b) it is not a *superannuation benefit; and

(c) it is not a payment of a pension or an *annuity (whether or not the payment is a superannuation benefit); and

(d) it relates only to a period of employment when you were not an Australian resident.

83-240 Termination payments tax free - Australian resident period

(1) A payment received by you is not assessable income and is not *exempt income if:

(a) it was received in consequence of:

(i) the termination of your employment in a foreign country; or

(ii) the termination of your engagement on qualifying service on an approved project (within the meaning of section 23AF of the Income Tax Assessment Act 1936), in relation to a foreign country; and

(b) it relates only to the period of that employment or engagement; and

(c) it is not a *superannuation benefit; and

(d) it is not a payment of a pension or an *annuity (whether or not the payment is a superannuation benefit); and

(e) you were an Australian resident during the period of the employment or engagement; and

(f) the payment is not exempt from income tax under the law of the foreign country; and

(g) for a period of employment - your foreign earnings from the employment are exempt from income tax under section 23AG of the Income Tax Assessment Act 1936; and

(h) for a period of engagement - your *eligible foreign remuneration from the service is exempt from income tax under section 23AF of that Act.

(2) For the purposes of subparagraph (1)(a)(ii), treat the termination of engagement on qualifying service on an approved project as including:

(a) retirement from the engagement; and

(b) cessation of the engagement because of the person’s death.

Note: The termination of a person’s employment is treated in the same way: see section 80-10.

Subdivision 83-E - Other payments

Guide to Subdivision 83-E

83-290 What this Subdivision is about

If a payment you receive in consequence of the termination of your employment is made more than 12 months after the termination of your employment, it does not qualify as an employment termination payment, subject to certain exceptions (see section 82-130).

The payment is treated as assessable income and no tax concession is allowed under Division 82.

Table of sections

Operative provisions

83-295 Termination payments made more than 12 months after termination etc.

Operative provisions

83-295 Termination payments made more than 12 months after termination etc.

A payment received by you that would be an *employment termination payment but for paragraph 82-130(1)(b) is assessable income.

2   Application

The amendment made by this Part of this Schedule applies on and after 1 July 2007.

Part 2   Main transitional and consequential amendments

Income Tax (Transitional Provisions) Act 1997

3   After Part 2-25

Insert:

Part 2-40 - Rules affecting employees and other taxpayers receiving PAYG withholding payments

Division 82 - Pre-10 May 2006 entitlements to life benefit termination payments

Table of Subdivisions

82-A Application of Division

82-B Transitional termination payments: general

82-C Pre-payment statements

82-D Directed termination payments made to superannuation and other entities

82-E Pre-10 May 2006 entitlements and employment termination payments made after 1 July 2012

Subdivision 82-A - Application of Division

Table of sections

82-10 Pre-10 May 2006 entitlements - transitional termination payments

82-10 Pre-10 May 2006 entitlements - transitional termination payments

(1) This Division applies in relation to a life benefit termination payment received by you on or after 1 July 2007 if:

(a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law or a workplace agreement within the meaning of the Workplace Relations Act 1996; and

(b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006.

(2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82-E).

(3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment.

(4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following:

(a) by a method or formula for working out the amount;

(b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection.

Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company.

Note: Section 80-15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given).

(5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82-A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82-E of this Act).

(6) In this Division:

transitional termination payment means:

(a) a life benefit termination payment to which this Division applies; or

(b) if this Division applies to only part of a life benefit termination payment - that part of the payment.

Subdivision 82-B - Transitional termination payments: general

Table of sections

82-10A Recipient has reached preservation age

82-10B Lower cap amount

82-10C Recipient under preservation age

82-10D Upper cap amount

82-10A Recipient has reached preservation age

Application

(1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment.

Note 1: You do not pay income tax on directed termination payments: see section 82-10G.

Note 2: Under section 82-10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age.

Tax free component

(2) The tax free component of the payment is not assessable income and is not exempt income.

Taxable component

(3) The taxable component of the payment is assessable income.

(4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%.

(5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part ) does not exceed 30%.

Note: The remaining part is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

(6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82-10B.

(7) The middle rate part is so much of the taxable component of the payment as:

(a) exceeds your low rate part (if any); and

(b) does not exceed the amount worked out as follows:

Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82-10 of the Income Tax Assessment Act 1997).

82-10B Lower cap amount

Initial lower cap amount is the ETP cap for the income year

(1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section.

Note: For the ETP cap amount, see section 82-160 of the Income Tax Assessment Act 1997.

Reduction of lower cap amount in relation to each payment

(2) Reduce your lower cap amount in relation to the payment (but not below zero):

(a) by the amount (if any) (the cap excess ) worked out under subsection (3); and

(b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82-10A(4).

(3) For paragraph (2)(a), the cap excess is worked out using this method:

Method statement

Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age.

Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later.

Step 3. Work out the amount (the cap difference ) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies.

Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3.

Directed termination payments - time of receipt when received by entity to which they are directed

(4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment.

ETP cap not to be reduced under section 82-10 of the Income Tax Assessment Act 1997

(5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82-10 of the Income Tax Assessment Act 1997.

82-10C Recipient under preservation age

Application

(1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment.

Note: You do not pay income tax on directed termination payments: see section 82-10G.

Tax free component

(2) The tax free component of the payment is not assessable income and is not exempt income.

Taxable component

(3) The taxable component of the payment is assessable income.

(4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%.

Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

(5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82-10D.

Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82-10 of the Income Tax Assessment Act 1997).

82-10D Upper cap amount

Initial upper cap amount is $1,000,000

(1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section.

Reduction of upper cap amount for each payment

(2) Reduce your upper cap amount in relation to the payment (but not below zero):

(a) by the total of all the amounts (if any) included in your assessable income under subsection 82-10C(3) and subsection 82-10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and

(b) by the total amount of the taxable components of all directed transitional payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year).

Directed termination payments - time of receipt when received by entity to which they are directed

(3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment.

Subdivision 82-C - Pre-payment statements