The ATO has released its Interpretative Decision stating that payments made by a member to an unfunded defined benefits provider in respect of surcharge payable under the Superannuation Contributions Tax (Assessment and Collection) Act 1997 (SCTA) are not to be regarded as contributions made to obtain superannuation benefits.
The ATO has formed this view on the basis that member payments are made to the provider under subsection 16(7) of the SCTA for the purpose of reducing the amount by which the member’s surcharge debt account is in debit and are not contributions made by the member to the provider for the purpose of obtaining superannuation benefits.
Reason for decision
SCTA, section 16 makes provision for the deferment of the liability of an unfunded defined benefits provider to pay surcharge assessed as payable on a member’s surchargeable contributions for a financial year.
The unfunded defined benefits provider is required to keep a surcharge debt account for each member and debit the account for surcharge assessed to be payable on the member’s surchargeable contributions. If the member’s account is in debit at the end of a financial year, the provider is required to debit the account for interest.
Subsection 16(7) of the SCTA operates to allow a member to make payments to the provider for the purpose of reducing the amount by which their surcharge debt account is in debit. A specific subsection of the fund’s governing rules allows a contributor ‘...to pay amounts to the fund in respect of the superannuation contributions surcharge payable in respect of the contributor’.
A member payment received by the fund provider pursuant to subsection 16(7) of the SCTA, and permitted by the specific subsection of the fund’s governing rules, is an amount paid to the fund for surcharge payable in respect of the contributor. The provider is required to forward the payment to the Commissioner of Taxation. Accordingly, the payment does not take on the characteristics of a contribution to obtain superannuation benefits but is clearly a payment made to reduce the balance of the member’s surcharge debt account.
In addition, the fund’s governing rules require the fund to refund to the member, any such payments that are received which are in excess of the member’s surcharge debt account. This means the excess payments do not result in additional pension benefits and do not remain in the fund. Accordingly, the amounts are not contributions to obtain superannuation benefits but are member payments specifically made to the fund pursuant to subsection 16(7) of the SCTA to reduce surcharge payable in respect of the member’s surchargeable contributions.