ATO ID 2008/161: Superannuation entities: tax offset - no-TFN contributions income - successor fund
Date of decision: 5 June 2008
Year of income: Year ended 30 June 2009
Business line: Superannuation

Issue
Is the trustee of a successor fund entitled to a tax offset under section 295-675 of the Income Tax Assessment Act 1997 (ITAA 1997), for tax payable by the original fund on no-TFN contributions income where the member quotes their tax file number (TFN) to the successor fund?

Decision
No. Where the member quotes their TFN to the successor fund the trustee of that fund is not entitled to a tax offset under section 295-675 of the ITAA 1997 for tax payable by the original fund on no-TFN contributions income.

Facts
Fund A (the original fund) is to be wound up on 30 June 2008. All the assets and members of Fund A are to be transferred to Fund B (the successor fund) on 30 June 2008. The trustees of Fund A and Fund B are different companies. The members' benefits and rights in Fund B will be equivalent to the benefits and rights they had in Fund A. A number of members of Fund A have not quoted (for superannuation purposes) their TFN to the trustee of Fund A before 30 June 2008. Fund A has received contributions in respect of members who have not quoted their TFN. These contributions will be included in Fund A's assessable income for the year ended 30 June 2008 and will be no-TFN contributions income of Fund A under section 295-610 of the ITAA 1997. Fund A will be liable to pay tax on the no-TFN contributions income for the year ended 30 June 2008. A member who had not quoted their TFN to the trustee of Fund A on or before 30 June 2008 subsequently quotes their TFN to the trustee of Fund B during the year ended 30 June 2009.

Reasons for decision
Summary: Where certain conditions are met, subdivision 295-J of the ITAA 1997 entitles a superannuation provider or RSA provider to a tax offset for tax payable on an amount of no-TFN contributions income. Subsection 295-675(1) of the ITAA 1997 states that the provider is entitled to a tax offset for the income years commencing on or after 1 July 2007 for amounts of tax that count toward the offset for the provider. The definition of 'superannuation provider' in subsection 995-1(1) of the ITAA 1997 includes the trustee of a superannuation fund. Section 295-680 of the ITAA 1997 provides that the amount of the tax offset is the total of each amount determined under subsection 295-675(2) of the ITAA 1997 for the current year. Subsection 295-675(2) of the ITAA 1997 states: An amount of tax counts towards the offset for the provider for the current year if: Paragraphs 295-675(2)(a) and (b) of the ITAA 1997 provide that the tax offset is only available to a provider where tax was payable by the provider on an amount of no-TFN contributions income of that fund. In the case of Fund A and Fund B, the tax payable on the no-TFN contributions income was paid by the trustee of Fund A in relation to the no-TFN contribution income of Fund A. Accordingly, the trustee of Fund B cannot satisfy paragraphs 295-675(2)(a) and (b) in relation to the tax payable by the trustee of Fund A in relation to this income. Further, paragraph 295-675(2)(c) of the ITAA 1997 requires that the amount of no-TFN contributions income was a contribution made to the fund for an individual who has quoted their TFN to that provider for the first time during the current year. In the case of the trustee of Fund B, the no-TFN contributions income was not a contribution that was made to Fund B. Accordingly, the trustee of Fund B also cannot satisfy paragraph 295-675(2)(c) of the ITAA 1997. Therefore, the trustee of Fund B will not be entitled to a tax offset in relation to the tax payable by the trustee of Fund A on no-TFN contributions income of Fund A.

Legislative references: Income Tax Assessment Act 1997 subdivision 295-J subsection 295-675(1) subsection 295-675(2) section 295-680 subsection 995-1(1)
Subject references: No-TFN contributions income - superannuation funds Superannuation Superannuation fund income Tax offset for no-TFN contributions income Taxation of superannuation entities