House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 3 - Clarification of surchargeable contributions

Purpose of the amendments

3.1 The purpose of the amendments is to remove any doubt about what superannuation amounts are subject to surcharge and how those amounts are to be calculated.

Background to the legislation

3.2 The Assessment and Collection Acts provide for the assessment and collection of the superannuation contributions tax payable on the surchargeable contributions of high income individuals.

3.3 The Superannuation Contributions Tax Imposition Act 1997 and the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997 impose the superannuation contributions tax that is payable on a members surchargeable contributions under the Assessment and Collection Acts.

Explanation of the amendments

Surchargeable contributions

3.4 Sections 8 and 9 respectively of the Assessment and Collection Acts, are amended to clarify what surchargeable contributions are and how they are to be calculated. [Item 2 of Schedules 1 and 2]

3.5 The amendments introduce flexibility to enable changes to be made to the method of calculation of surchargeable contributions to take account of changes to benefit structures and the like.

Surchargeable contributions for a member other than a member of a defined benefits superannuation scheme

3.6 New subsections 8(2) and 9(2) respectively of the Assessment and Collection Acts provide that the surchargeable contributions of a member of a superannuation scheme that is not a defined benefits scheme are so much of the contributed amounts (defined in sections 43 and 38 respectively of the Assessment and Collection Acts) [Items 2 and 31 of Schedule 1 and Items 2 and 18 of Schedule 2] that are:

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taxable contributions under:

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subparagraph 274(1)(a)(i) of ITAA1936 contributions made to a complying superannuation fund by an employer or by another person who is not the member;

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subparagraph 274(1)(b)(ii) of ITAA1936 a superannuation guarantee shortfall component paid by the Commissioner to a complying superannuation fund;

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subparagraph 274(1)(ba)(i) of ITAA1936 contributions made to an RSA by an employer or by another person who is not the member;

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subparagraph 274(1)(ba)(iv) of ITAA1936 a superannuation guarantee shortfall component paid by the Commissioner to an RSA;

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paragraph 274(1)(d) of ITAA1936 a superannuation guarantee shortfall component paid by the Commissioner to a complying ADF; and

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paragraph 274(1)(e) of ITAA1936 amounts paid by the Commissioner to a complying superannuation fund or an RSA from the Superannuation Holding Accounts Reserve; or

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contributions allowed as a deduction to a member under section82AAT of ITAA1936 because:

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the member does not receive any employer superannuation support; or

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the member does receive employer superannuation support but the members income from the employer who provides that support is less than 10% of the members total assessable income; or

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specified roll-over amounts that are the roll-over of an amount that is an ETP under paragraph (a) of the definition of ETP in subsection 27A(1) of ITAA1936 received by a complying superannuation fund, an RSA, a complying ADF, a life assurance company or a registered organisation; and

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if there are any regulations in force for the purpose of subparagraph (ii) of the definition of contributed amounts any amount referred to in the regulations that are credited, allocated or attributable to the member for the financial year less any part of such an amount that is, under the regulations, to be regarded as reasonably attributable to interest; and

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if there are no regulations in force for the purpose of subparagraph (ii) of the definition of contributed amounts and the financial year is later than the 1996-97 financial year any allocated surplus amounts in relation to the member in respect of the financial year.

Surchargeable contributions for a member of a defined benefits superannuation scheme

3.7 New subsections 8(3) and 9(4) respectively of the Assessment and Collection Acts provide that the surchargeable contributions of a member of a defined benefits superannuation scheme are the amounts that constitute the actuarial value of the benefits that accrued to, and the value of administration expenses and risk benefits provided in respect of, a member in a financial year. [Item 3 of Schedules 1 and 2]

Actuarial value of benefits prior to 1999-2000 financial year

3.8 New subsections 8(4) and 9(5) respectively of the Assessment and Collection Acts explain that for the 1996-97 and the next two financial years, the actuarial value of the benefits that accrued to, and the value of administration expenses and risk benefits provided in respect of, a member in the financial year is to be worked out by an eligible actuary using the formula:

Annual salary * Notional surchargeable contributions factor


annual salary is either:

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the members annual salary for the financial year; or

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if another amount is taken to be the members annual salary for the purposes of the scheme, that other amount.

notional surchargeable contributions factor is the factor worked out by an eligible actuary either:

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in accordance with the method set out in Superannuation Contributions Ruling SCR 97/1 [defined at Item 40 of Schedule1 and Item 22 of Schedule 2] ; or

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in accordance with another method approved in writing by the Commissioner.

3.9 The method set out in SCR 97/1 applies to all providers. However, if a provider is of the view that the method set out in SCR 97/1 is not appropriate for the particular superannuation scheme, the provider may apply to the Commissioner to use another method.

3.10 A provider applying to use another method to calculate the notional surchargeable contributions factor will be required to:

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explain why the method in SCR 97/1 is inappropriate;

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set out that other method; and

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explain why that other method is the most appropriate method to be used.

3.11 A superannuation provider is not required to apply to the Commissioner to use another method.

3.12 New subsections 42(2) and (3) and 37(2) respectively of the Assessment and Collection Acts enable regulations to be made to modify Superannuation Contributions Ruling SCR 97/1. The regulations can insert, omit or alter a provision of SCR 97/1 and can be made to take effect before the date on which they are notified in the Gazette . The new subsections provide that subsection 48(2) of the Acts Interpretation Act1901 does not apply in relation to regulations made under that Act. [Item28 of Schedule 1 and Item 14 of Schedule 2]

Actuarial value of benefits for the 1999-2000 financial year and later financial years

3.13 New subsections 8(5) and 9(6) respectively of the Assessment and Collection Acts provide that for the 1999-2000 and later financial years, the actuarial value of the benefits that accrued to, and the value of administration expenses and risk benefits provided for, a member in a financial year is to be calculated in accordance with a method set out in the regulations (or another method approved by the Commissioner in writing). [Item3 of Schedules 1 and 2]

3.14 The definition of notional surchargeable contributions factor at sections 43 and 38 respectively of the Assessment and Collection Acts is repealed. [Item 37 of Schedule 1 and Item 20 of Schedule 2]