ATO ID 2008/78: Excess Contributions Tax: notional taxed contributions - meaning of defined benefit member - person entitled to a deferred benefit
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 deferred benefit 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 person who is entitled to a deferred benefit from a defined benefit superannuation fund is a 'defined benefit member' for the purposes of regulation 292-170.02 of the ITAR 1997.

Facts
The MNO defined benefit superannuation fund has 52 members. During the 2007-08 income year, four of the members were accruing defined benefit entitlements in the fund. The remaining 48 members have left the employment of the employer sponsor of the fund. None of them have reached normal retirement age and they have each elected to defer their benefits in the MNO fund. Their benefit in the MNO fund will be paid sometime in the future. The MNO 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. This definition does not include anything to suggest that a fund member with deferred benefits 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 of the ITAR 1997, 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 deferred benefit members are meant to be included as defined benefit members for other purposes. The MNO defined benefit fund which has 52 members, 4 of whom are accruing benefits and 48 of whom have deferred their benefit in the fund has more than 5 defined benefit members. Accordingly, the MNO 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 2008/79
Subject references: Concessional contributions Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax