ATO ID 2008/77: Excess Contributions Tax: notional taxed contributions - meaning of defined benefit member - person receiving a defined benefit pension
Date of decision: 1 May 2008
Year of income: Year ended 30 June 2008
Business line: Superannuation

Issue
Is a person who is receiving a defined benefit pension from a defined benefit superannuation fund 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 receiving a defined benefit pension from a defined benefit superannuation fund is a 'defined benefit member' of the fund for the purposes of regulation 292-170.02 of the ITAR 1997.

Facts
The XYZ 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 received defined benefit pensions from the fund during the 2007-08 income year. The XYZ 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 292-170(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. This definition does not include anything to suggest that a fund member in receipt of a defined benefit pension should be excluded from the definition. It is noted that there is a definition of 'defined benefit member' in subsection 3.6(2B) of the 'New entrant age' section of Part 3 of Schedule 1A, and that definition excludes members that are receiving only pension benefits from the fund, and those that have deferred their benefit entitlement in the fund. That definition applies only for the purposes of section 3.6 of Part 3 of Schedule 1A of the ITAR 1997. The specific exclusion of these members indicates that members in receipt of a defined benefit pension from the fund are meant to be included as defined benefit members for other purposes. The XYZ defined benefit fund which has 52 members, 4 of whom are accruing benefits and 48 of whom are receiving pensions has more than 5 defined benefit members. Accordingly, the XYZ 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) subsection 292-170(1)
Related ATO interpretative decisions: ATO ID 2008/78 | ATO ID 2008/79
Subject references: Concessional contributions Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax