ATO ID 2008/79: Excess Contributions Tax: notional taxed contributions - meaning of defined benefit member - person not accruing benefits
Date of decision: 1 May 2008
Year of income: Year ended 30 June 2008
Business line: Superannuation

Issue
Is a person who is entitled to a defined benefit from a defined benefit superannuation fund but is currently not accruing further defined benefits, a 'defined benefit member' of the fund for the purposes of regulation 292-170.02 of the Income Tax Assessment Regulations 1997 (ITAR 1997)?

Decision
Yes. A member who is entitled to a defined benefit from a defined benefit superannuation fund but is currently not accruing further defined benefits, is a defined benefit member of the fund for the purposes of regulation 292-170.02 of the ITAR 1997.

Facts
The WXY defined benefit superannuation fund has 52 members. During the 2007-08 income year, four of the members are accruing defined benefit entitlements in the fund. The remaining 48 members are entitled to defined benefits from the fund but for the 2007-08 income year did not accrue further defined benefits. These members have all reached the maximum benefit entitlement under the rules of the fund. The fund has asked whether the notional taxed contributions for its members should be determined using Schedule 1A of the ITAR 1997.

Reasons for decision
Summary: Notional taxed contributions are the contributions which are used to determine the amount of concessional contributions in respect of a person's defined benefit interest for excess concessional contributions tax. Regulation 292-170.02 of the ITAR 1997 sets out when Schedule 1A of the ITAR 1997 is to be used to determine the amount of notional taxed contributions for the purposes of subsection 291-170(1) of the Income Tax Assessment Act 1997 (ITAA 1997). One of the requirements is that the superannuation fund has 5 or more defined benefit members. There is no definition of 'defined benefit member' in regulation 292-170.02 of the ITAR 1997. However the term is defined in regulation 995-1.01 of the ITAR 1997. The definition does not include anything to suggest that a member who is entitled to a defined benefit from the fund even where they are not currently accruing further defined benefits should be excluded. The WXY defined benefit fund which has 52 members, 4 of whom are accruing benefits and 48 of whom are not accruing further defined benefits in the fund has more than 5 defined benefit members. Accordingly, the WXY defined benefit fund must use Schedule 1A of the ITAR 1997 to determine the notional taxed contributions for the members of the fund.

Legislative references: Income Tax Assessment Act 1997 subsection 291-170(1)
Related ATO interpretative decisions: ATO ID 2008/77 | ATO ID 2008/78
Subject references: Concessional contributions Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax