10 Apr 14 When is a bank account a segregated current pension asset? - TD 2014/7
On 9 April 2014, the ATO issued Taxation Determination TD 2014/7 entitled "Income tax: in what circumstances is a bank account of a complying superannuation fund a segregated current pension asset under section 295-385 of the Income Tax Assessment Act 1997?"
It was not previously released in draft form.
The Ruling states as follows:
"1. An account offered by banks or similar financial institutions (which are referred to here generally as banks) is an asset of a complying superannuation fund that is invested, held in reserve or otherwise being dealt with solely to enable, or for the sole purpose of enabling, a fund to discharge liabilities payable in respect of superannuation income stream benefits payable by the fund at that time ('the relevant sole purpose'), where the whole of the account is so invested, held or dealt with.
2. It is recognised that some banks offer what are commonly referred to as 'sub-accounts'. Where all transactions and balances are recorded, maintained and reported on a sub-account basis, then a sub-account held for the relevant sole purpose may be a segregated current pension asset for the purposes of section 295-385 of the ITAA 1997. This is the case even if other sub-accounts within the higher-level account are not held for the relevant sole purpose.
3. This interpretation applies to actual sub-accounts which are formally maintained by banks, and also to informal or notional sub-accounts where proper accounting records are maintained by other non-bank parties (for example, a trustee of a superannuation fund).
4. Some receipts or outgoings that require apportionment between liabilities in respect of superannuation income stream benefits payable by a fund at that time and other liabilities will of necessity be paid to or from a single bank account. Where such amounts are paid in a bona fide manner to or from a segregated current pension asset, being the segregated bank account, in order to maintain segregation of the bank account the Commissioner will require the fund to make a transfer or set off (equal to the value of the receipt or outgoing that does not relate to the fund's liability to meet its superannuation income stream benefits payable at that time) between the fund's segregated bank account and another bank account within a reasonable time.
5. When interest income is derived on amounts that were paid to a bank account that is a segregated current pension asset in the above circumstances, then any interest that is attributable to the amount required to be transferred or set off as explained above is taken not to have been earned by the segregated current pension asset.
6. There may be cases in which a superannuation contribution is made in error to a bank account or recorded against the incorrect sub-account and that particular bank account or sub-account is a segregated current pension asset. The amount of the superannuation contribution must be transferred to the correct bank account or sub-account within a reasonable time. Any interest income that is earned on that superannuation contribution is taken not to be attributable to the segregated current pension asset, and would not form part of any exempt income under section 295-385 of the ITAA 1997.
7. Some essential incidental expenses payable by a complying superannuation fund may relate to the operation of the fund generally and might not be subject to apportionment. Payment of such essential incidental expenses from a segregated bank account will not prevent the account from being a segregated current asset held for the relevant sole purpose."