Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997

Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 | Zoe

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What it does

The Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 establishes a comprehensive regime for identifying, assessing, deferring and ultimately collecting a superannuation contributions surcharge on certain contributions made for high-income members of constitutionally protected superannuation funds. Section 5 states the object bluntly: to provide for the assessment and collection of the surcharge payable on surchargeable contributions for high-income members of these funds.

The simplified outline in s.6 captures the operational flow. For each financial year from 1996-97 to those ending before 1 July 2005, the Commissioner calculates a member's adjusted taxable income (defined by cross-reference to the Superannuation Contributions Tax (Assessment and Collection) Act 1997). If that income exceeds the surcharge threshold published under s.10, the Commissioner then determines the member's surchargeable contributions under s.9, applies the appropriate rate, and issues an assessment under s.14. Surcharge is not payable unless adjusted taxable income exceeds the threshold (s.8(2)) and does not apply to Territory residents in defined circumstances (s.8(3)).

Section 9 is the mechanical heart of the Act. For members other than those in defined benefit schemes, surchargeable contributions are the sum of taxable contributions under identified paragraphs of s.274(1) of the Income Tax Assessment Act 1936, deductible member contributions under s.82AAT, and rolled-over eligible termination payments (ETPs) accrued after 20 August 1996, subject to a pro-rata formula in s.9(3) that limits surcharge to the post-20 August 1996 portion. A seven-step reduction applies where an ETP with an excessive component is paid (s.9(9)-(10)).

For defined benefit members the calculation is actuarial. For 1996-97 to 1998-99, s.9(5) uses the formula annual salary × notional surchargeable contributions factor, where the factor is determined by an eligible actuary under Superannuation Contributions Ruling SCR 97/1 or an approved alternative that excludes non-deductible member contributions. From 1999-2000 the regulations or Commissioner approval prescribe a method excluding both government co-contributions under the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 and non-deductible member contributions (s.9(6)). Transitional pro-rating applies for the 1996-97 year to the period after 7.30 pm on 20 August 1996 (s.9(8)).

Liability sits with the member (s.11(1)), but payment is deferred. The Commissioner maintains a surcharge debt account for each member (s.15(2)). The account is debited with assessed surcharge and, while in debit at year-end, with interest at the Treasury bond rate for 10-year bonds (s.15(4)-(5)). Actual payment is triggered when a superannuation benefit becomes payable (s.15(6)), on fund cessation as a constitutionally protected fund (s.15(6A)), or via payment splits under Part VIIIB or VIIIC of the Family Law Act 1975 (s.15(6AA)). The member then pays the lesser of the account balance or a percentage (15 per cent, 14.5 per cent or 12.5 per cent depending on accrual year) of the employer-financed component of the relevant benefit. Members may make voluntary payments to reduce the account at any time (s.15(9)).

Superannuation providers (trustees of constitutionally protected funds) bear significant reporting obligations. Under s.12 they must lodge annual statements by the notification date (15 December 1997 for 1996-97, otherwise 31 October) detailing member identity, tax file number if supplied, and the total contributed amounts or, for defined benefit providers, the actuarial surchargeable contributions. Additional statements are required when benefits are paid or payment splits occur. Providers must also supply the same particulars to members within prescribed timeframes (s.12(4)-(4B)).

Assessments may be amended in defined windows. Section 15A sets general four-year periods, with unlimited time for fraud or evasion, court-extensible periods where the member's conduct has delayed examination, and special rules for amendments that reduce liability. Section 16 mandates amendment where a tax file number is later quoted, reducing the surcharge to the amount that would have applied had the number been known. Section 17 permits amendment where adjusted taxable income or contribution amounts are revised, with flow-on debits or credits to the surcharge debt account and, where liability increases after a benefit has become payable, immediate payment of the increase within three months.

Interest and penalties reinforce compliance. If an amendment increases liability, the general interest charge (GIC) runs from 15 June of the relevant year until the day before the amended assessment (s.18). Late payment of surcharge itself attracts GIC from the due date (s.21). Anti-avoidance rules in s.30 prohibit schemes intended to avoid surcharge, including through allocated surplus amounts. Record-keeping obligations under s.34 require providers to retain English-language records for five years or until transactions are complete.

Objections lie under Part IVC of the Taxation Administration Act 1953 (s.20), with the Commissioner entitled to rely on the latest income tax assessment and provider statement when deciding objections relating to adjusted taxable income. The Commissioner has general administration (s.26), must report annually to Parliament (s.27), and may prescribe forms and methods for information (s.13). The Act binds the Crown but does not permit Crown prosecution (s.3), extends to Norfolk Island (s.4), and excludes from its operation persons who are members solely because they were State judges at commencement (s.7).

In short, the legislation creates a closed-loop system that identifies high-income protected-fund members, quantifies their notional contributions (with actuarial sophistication for defined benefit schemes), defers collection until benefits emerge, charges compounding interest in the meantime, and provides structured amendment, objection and enforcement machinery. Every substantive operative provision is tied to the concepts of "surchargeable contributions", "adjusted taxable income" and "constitutionally protected superannuation fund", ensuring the surcharge only bites where Parliament intended.

Who it affects

The primary subjects are members of constitutionally protected superannuation funds whose adjusted taxable income exceeds the surcharge threshold. "Member" is defined in s.38 to include former members, and "constitutionally protected superannuation fund" takes its meaning from the Income Tax Assessment Act 1997. These are overwhelmingly public sector schemes established by or under State law that enjoy constitutional protection from Commonwealth taxation. The Act therefore directly affects senior public servants, judges (subject to the s.7 carve-out for those who were State judges at commencement), police, teachers and other employees in unfunded or partially funded State schemes.

High-income earners are captured once their adjusted taxable income exceeds the indexed threshold published annually by the Commissioner under s.10. The threshold began at $70,000 for 1996-97 and was indexed by reference to full-time adult average weekly ordinary time earnings. Because the surcharge is levied on the member personally, it reaches individuals who may have no day-to-day control over the fund's administration.

Superannuation providers—defined as trustees of constitutionally protected funds, including both superannuation (funded defined benefits) providers and superannuation (unfunded defined benefits) providers—are subject to extensive compliance obligations. They must identify every member at year-end, calculate or report surchargeable contributions, lodge statements with the Commissioner by the notification date (s.12(2)), provide further statements on benefit payment or payment split (s.12(3), (6)), and supply corresponding information to members (s.12(4)-(4B)). Providers must also respond to member directions to pay surcharge debt from benefits when members roll over or purchase annuities (s.15(8A)-(8B)).

The Commissioner of Taxation is both assessor and collector. He calculates adjusted taxable income, determines surchargeable contributions (relying on provider statements and actuarial valuations), issues assessments and notices (s.14), maintains surcharge debt accounts (s.15), applies GIC, amends assessments within the statutory windows, and recovers unpaid amounts. The Act grants the Commissioner discretion to approve alternative actuarial methods (s.9(5)(b), (6)(b)), extend lodgment dates, and exempt providers from electronic-lodgment requirements (s.13(4)).

Spouses and former spouses are indirectly affected through the family law amendments. Where a payment split applies to a splittable payment and the member's surcharge debt account is in debit, the member's liability is calculated on the benefits that would have been payable but for the split (s.15(6AA)). This can alter the quantum the member ultimately pays and requires providers to furnish additional data to the Commissioner.

Key duties and rights

Members' principal duty is to pay the surcharge when it becomes payable under s.15(6), (6AA) or (6A). Until then their obligation is passive: the debt accrues interest inside the Commissioner's account. Members may, however, make voluntary payments at any time to reduce the debit balance (s.15(9)), thereby limiting interest exposure. They must also supply accurate information to providers so that statements under s.12 are correct, and they are obliged to respond to requests for tax file numbers where quotation would reduce the assessed surcharge.

Members enjoy the right to object against any assessment under Part IVC of the Taxation Administration Act 1953 (s.20(1)). In deciding objections relating to adjusted taxable income the Commissioner must rely on the latest income tax assessment and the latest provider statement (s.20(2)), giving members a degree of predictability. Members may request providers to supply the particulars included in statements for 1998-99 and later years (s.12(4A)), and they may direct a new fund, RSA provider, life company or registered organisation to pay the surcharge debt from rolled-over benefits (s.15(8A)).

Superannuation providers' duties are onerous. They must lodge annual member statements and event-based statements within strict timeframes or any extended date allowed by the Commissioner (s.12(2)-(3), (6)-(7)). Statements must contain prescribed particulars including tax file numbers if supplied, total contributed amounts or actuarial surchargeable contributions, and details of payment splits. Providers must give corresponding information to members within 12 months for pre-1998-99 years or within 30 days of request thereafter (s.12(4)-(4B)). Information must be given in the form and manner notified by Gazette notice if data-processing devices are used (s.13). Records must be kept in English or convertible form for five years (s.34). Providers are prohibited from entering avoidance schemes (s.30) and must comply with member directions to remit surcharge from benefits (s.15(8B)).

The Commissioner’s duties include making an assessment for every year in which surchargeable contributions exist (s.14(1)), maintaining accurate surcharge debt accounts, debiting interest only at the prescribed Treasury bond rate (s.15(5)), issuing notices when payment is triggered (s.15(7)), and amending assessments only within the temporal limits of s.15A. The Commissioner must publish surcharge thresholds before each relevant year (s.10(7)) and give annual reports to Parliament (s.27).

Rights of providers are more limited but include the ability to seek Commissioner approval for alternative actuarial methods or extended lodgment times, and to obtain exemption from electronic-lodgment requirements by legislative instrument (s.13(4)). Both members and providers may apply to the Federal Court for extension of amendment periods where an examination has been delayed (s.15A(5)-(6)).

Penalties and enforcement

Enforcement rests primarily on the general interest charge rather than fixed penalties. Failure to pay surcharge by the due date (normally three months after the s.15(7) notice) triggers GIC on the unpaid amount for each day it remains outstanding (s.21(1)-(2)). GIC also applies to increases arising from amended assessments, running from 15 June of the relevant financial year until the day before the amended assessment issues (s.18(1)). The note to both sections points to Part IIA of the Taxation Administration Act 1953 for the calculation method.

The Act contains no direct offence for non-lodgment of s.12 statements; instead the regulations may prescribe penalties not exceeding five penalty units (s.37(d)). Avoidance schemes are prohibited by s.30 but the section creates no separate offence; it operates as a civil prohibition that the Commissioner may rely upon in assessment or amendment decisions.

Recovery is assisted by the note to s.15(8) directing readers to Part 4-15 of Schedule 1 to the Taxation Administration Act 1953 for collection and recovery rules. The Commissioner's right to sue for unpaid surcharge or GIC is expressly preserved (s.21(5)). Assessments remain valid despite procedural non-compliance (s.14(7)).

For providers, the principal sanction for poor record-keeping is the practical inability to defend an assessment coupled with the five-year retention obligation (s.34). Failure to retain records after the Commissioner has notified that retention is no longer required is not an offence, but the safe harbour disappears.

The fraud or evasion rule in s.15A(3)(a) removes any temporal limit on amendment, exposing members to indefinite liability where deliberate concealment is found. This is reinforced by the four-year limit on amendments that reduce liability (s.15A(4)), creating an asymmetric exposure.

How it interacts with other laws

The Act is deliberately parasitic on several core statutes. "Adjusted taxable income" is imported unchanged from the Superannuation Contributions Tax (Assessment and Collection) Act 1997. "Constitutionally protected superannuation fund" takes its meaning from the Income Tax Assessment Act 1997. "Complying superannuation fund", "regulated superannuation fund" and "exempt public sector superannuation scheme" are defined by reference to the Superannuation Industry (Supervision) Act 1993 (s.38).

Tax concepts are borrowed wholesale from the Income Tax Assessment Act 1936: "eligible termination payment", "excessive component", "post-June 83 component", "retained amount", "taxed element", "rolled-over", "taxable contributions" under s.274(1), and the deduction under s.82AAT all appear in s.9. The definition of "taxable income" is the amount assessed under the 1936 Act.

Objections, reviews and appeals are routed entirely through Part IVC of the Taxation Administration Act 1953 (s.20). Collection, recovery, GIC calculation and confidentiality obligations are likewise governed by that Act (notes to ss.15(8), 21, 26). The general administration provision (s.26) expressly subjects information acquired under the Act to the Division 355 confidentiality regime in Schedule 1 to the Taxation Administration Act.

Family law integration is achieved by repeated reference to "payment split" and "splittable payment" within the meaning of Part VIIIB or VIIIC of the Family Law Act 1975 (ss.12(8), 15(11)). These definitions trigger additional reporting (s.12(6)) and modify the quantum of surcharge payable by reference to the benefits that would have been paid but for the split (s.15(6AA)).

The Superannuation (Government Co-contribution for Low Income Earners) Act 2003 is carved out of actuarial calculations from 1999-2000 onwards (s.9(6)), illustrating how later contribution-support legislation was grafted onto the surcharge framework without disturbing its core.

The Criminal Code applies to all offences (s.36), and regulations may prescribe matters necessary to give effect to the Act, including statement lodgment methods (s.37).

Because the surcharge is imposed by the companion Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997, the Assessment and Collection Act operates as the machinery statute. The two must be read together; the rates and thresholds in the Imposition Act are applied through the assessment mechanics contained here.

Recent changes and why

The text reflects a series of amendments made between 1997 and 2005 that progressively refined rather than replaced the original architecture. The most visible change is the prospective closure of the regime: every operative provision is confined to financial years ending before 1 July 2005 (ss.8(1), 12(2), 14(1)). This sunset was inserted to implement the Government's decision to abolish the surcharge for post-30 June 2005 years, a policy shift driven by the desire to simplify superannuation taxation and remove disincentives to saving.

Rate reductions are embedded in s.15(6) and (6AA). The employer-financed component that accrued between 20 August 1996 and 1 July 2003 is taxed at 15 per cent, the 2003-04 year at 14.5 per cent and the 2004-05 year at 12.5 per cent. These stepped reductions mirrored parallel changes in the companion Imposition Act and were intended to ease the burden on affected members in the final years of the regime.

Family law amendments introduced in the early 2000s added subsections 12(6)-(8), 15(6AA) and 15(11). These provisions were required to accommodate the Family Law Act's payment split regime so that surcharge debt followed the member rather than being extinguished or duplicated on divorce. The amendments also inserted parallel obligations for providers to report payment-split events and adjusted the liability formula to reference "benefits that would have been payable but for the payment split".

The 1999-2000 actuarial method change (s.9(6)) and the explicit exclusion of government co-contributions were responses to the introduction of the Low Income Superannuation Contribution (later Co-contribution) regime in 2003. Parliament wished to ensure that the new government contribution did not itself attract surcharge, nor distort the actuarial valuation of defined benefit accruals.

Section 15A's elaborate amendment rules, including Federal Court extension orders and the member's ability to consent to extensions, were added to balance the Commissioner's need for sufficient time to audit complex actuarial valuations against taxpayers' interest in finality. The four-year reduction window and the fraud/evasion unlimited period mirror long-standing income tax amendment rules, ensuring consistency.

The net effect of these changes was to narrow the temporal scope while expanding the Act's interaction with family law and later contribution-support legislation. Each amendment was technical, designed to maintain the integrity of the original 1996 policy settings in a changing superannuation environment.

Court challenges and controversies

The Act itself contains no reported cases, but its structure anticipates litigation at several flashpoints. Section 20 expressly channels objections into the Part IVC regime, making Federal Court and Administrative Appeals Tribunal decisions on adjusted taxable income, actuarial valuations and the characterisation of contributions the likely battlegrounds.

Controversy is most likely to arise around the actuarial valuation of defined benefit surchargeable contributions. The choice between SCR 97/1 and an "approved" method, the meaning of "annual salary" where scheme rules deem a different figure, and the exclusion of non-deductible member contributions have all produced technical disputes. Because the Commissioner may rely on the provider's statement when deciding objections (s.20(2)), members who disagree with the actuarial factor certified by the fund's eligible actuary face an evidentiary burden to displace it.

The treatment of allocated surplus amounts (defined in s.38) and the seven-step reduction for excessive-component ETPs (s.9(9)-(10)) have also generated disputes. The requirement that an eligible actuary form an opinion on what is "reasonable having regard to" member contributions, investment earnings and "any other relevant matters" introduces actuarial judgement that is difficult to challenge on judicial review.

The interaction with family law payment splits has produced practical controversy. Calculating the "employer-financed component … that would have been payable but for the payment split" requires hypothetical reconstruction of benefits, often many years after the event. Providers have complained about the administrative burden of additional statements under s.12(6).

The unlimited amendment power for fraud or evasion (s.15A(3)(a)) and the Commissioner's ability to seek Federal Court extensions (s.15A(6)) have been criticised as creating prolonged uncertainty, although these provisions mirror income tax rules upheld in numerous cases.

Tax file number quotation disputes under s.16 have been rare but technically straightforward: once the number is supplied the Commissioner "must" amend the assessment. Failure to do so would be amenable to mandamus.

Overall the Act has generated fewer public controversies than the parallel surcharge regime for ordinary funds, largely because constitutionally protected funds are predominantly public sector and the number of affected high-income members is comparatively small. Nevertheless the actuarial, timing and family-law complexities continue to require careful advice.

Gotchas

Most practitioners assume the surcharge disappears after 30 June 2005. While no new surcharge arises, existing surcharge debt accounts may still be in debit and will continue to attract interest until a benefit is paid or the member voluntarily clears the balance. Advisers must therefore review historical assessments even for clients retiring after 2005.

The actuarial valuation for defined benefit members under s.9(5) or (6) can produce counter-intuitive results. The notional surchargeable contributions factor can exceed the actual employer contribution rate because it captures the present value of future benefit accruals. Clients in generous final-salary schemes can face surcharge on notional amounts far higher than cash contributed.

The s.9(3) pro-rata formula for rolled-over ETPs looks simple but the definitions of "post-20 August 1996 period", "total period", "reduced amount" and the exclusions for post-June 1994 invalidity and CGT exempt components are frequently misapplied. An error here can lead to overpayment that is hard to recover after the four-year reduction window in s.15A(4) closes.

Payment-split calculations under s.15(6AA) require the member to pay surcharge on benefits that the non-member spouse will actually receive. This can produce a cash-flow mismatch where the member has no lump sum from which to pay the Commissioner.

Voluntary payments under s.15(9) reduce the account immediately but do not generate an interest credit for the period before the payment is applied. Timing therefore matters.

The Commissioner's reliance entitlement under s.20(2) means that an objection based on "my provider got the actuarial factor wrong" will fail unless fresh actuarial evidence is adduced that displaces the original statement. Late-obtained actuarial opinions are often rejected as insufficient.

Section 7's exclusion for State judges is narrower than many assume. It applies only to persons who are members because they are judges at commencement. A judge appointed after commencement who is also a member of a protected fund for other reasons remains subject to the Act.

The definition of "allocated surplus amount" in s.38 requires an actuarial opinion that the surplus exceeds what is reasonable. Many funds have simply reported the entire allocation, exposing members to surcharge on amounts that could have been excluded.

Finally, the five-year record retention obligation in s.34 continues even after the fund ceases to be constitutionally protected. Trustees who destroy records on the mistaken belief that the surcharge regime has ended risk inability to defend amended assessments.

How to comply

Superannuation providers should maintain a register of all members of constitutionally protected funds and a calendar of notification dates. For each year ending before 1 July 2005 they must extract or calculate the total contributed amounts or actuarial surchargeable contributions, obtain tax file numbers where offered, and lodge machine-readable statements in the form prescribed by any Gazette notice under s.13. Where benefits are paid or payment splits occur, event-based statements must be lodged within 14 days (subject to extensions). Member information must be supplied within the statutory windows or upon request. Records explaining every transaction must be retained for five years in accessible English or convertible form. Providers should obtain actuarial certification of notional factors or approved methods before reporting defined benefit amounts and should document any Commissioner approvals.

Members (or their advisers) should request annual statements from providers under s.12(4A) and retain them. They must quote tax file numbers to the Commissioner as early as possible to avoid inflated assessments that are hard to amend after the four-year period. Where an assessment issues, members should check the adjusted taxable income figure against their latest tax return and the surchargeable contributions against the provider statement. Objections must be lodged within the Part IVC timeframe.

Before retirement or rollover, members should obtain a surcharge debt account statement from the Commissioner. If a benefit is about to become payable they should calculate the lesser of the account balance and the percentage of the employer-financed component under s.15(6). Where rolling to another fund they may direct the receiving entity to pay the surcharge from the transferred amount. Voluntary payments should be made if the projected interest cost exceeds the member's after-tax return on the funds.

Actuaries preparing notional surchargeable contributions factors must follow SCR 97/1 for pre-1999-2000 years or the regulated method thereafter, explicitly excluding non-deductible member contributions and government co-contributions. The eligible actuary's report should be retained by both the provider and the member.

All parties should monitor surcharge debt accounts annually. Interest compounds and can materially increase the ultimate liability. Where an amendment is likely (for example because taxable income is being adjusted by the ATO), members should consider making a protective voluntary payment to halt further interest.

Compliance is best achieved by integrating the Act's requirements into the fund's annual administration cycle, maintaining a central surcharge register, and obtaining specialist actuarial and legal sign-off on defined benefit calculations. Because the regime is now closed, the principal ongoing task is accurate reporting of historical data and timely payment when benefits are finally taken.

Part 1

Preliminary

Part 1—Preliminary

Short title

1 Short title

This Act may be cited as the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997.

Commencement

2 Commencement

This Act commences on the day on which it receives the Royal Assent.

Act to bind Crown

3 Act to bind Crown

(1) This Act binds the Crown in right of the Commonwealth, of each of the States, of the Australian Capital Territory and of the Northern Territory. (2) Nothing in this Act permits the Crown to be prosecuted for an offence.

Extension to Norfolk Island

4 Extension to Norfolk Island

This Act extends to Norfolk Island.

Object of Act

5 Object of Act

The object of this Act is to provide for the assessment and collection of the superannuation contributions surcharge payable on surchargeable contributions for high‑income members of constitutionally protected superannuation funds.

Simplified outline of Act

6 Simplified outline of Act

The following is a simplified outline of this Act.

(a) If there are surchargeable contributions for a member for the 1996‑97 financial year or a later financial year (being a financial year that ends before 1 July 2005), the Commissioner will calculate the member’s adjusted taxable income for the financial year.

(b) If the amount calculated is greater than the surcharge threshold amount, the Commissioner will calculate the rate of surcharge and the amount of the surcharge payable on the surchargeable contributions. Only surchargeable contributions calculated for a period after 7.30 pm on 20 August 1996 are subject to surcharge.

(c) For a defined benefits superannuation scheme, the surcharge is payable on an amount calculated to be the actuarial value of the benefits that accrued to, and the value of the administration expenses and risk benefits provided in respect of, the member for the financial year.

(d) If, after the assessment of surcharge, the member’s adjusted taxable income is found to be different from the amount that was previously calculated or the surchargeable contributions are found to be different from the amount on which the assessment was based, the Commissioner may amend the assessment.

(e) The member is liable to pay the surcharge on the member’s surchargeable contributions for a financial year, but the surcharge is not payable before benefits become payable.

(f) If liability for surcharge is increased as a result of an amendment of an assessment, interest is payable on the additional surcharge.

(g) A member may object against an assessment of surcharge in the way set out in Part IVC of the Taxation Administration Act 1953 for objecting against assessments of income tax.

(h) A late payment penalty applies if surcharge is not paid on time.

Exclusion of certain members

7 Exclusion of certain members

This Act does not apply to a person who is a member because he or she is a judge of a court of a State at the commencement of this Act.

Part 2

Liability to surcharge

Part 2—Liability to surcharge

Superannuation contributions surcharge

8 Superannuation contributions surcharge

Financial years to which surcharge applies (1) Superannuation contributions surcharge is payable on a member’s surchargeable contributions for the financial year that began on 1 July 1996 or a later financial year that ends before 1 July 2005. No surcharge is payable unless adjusted taxable income is greater than surcharge threshold (2) Surcharge is not payable for a financial year unless the member’s adjusted taxable income for the financial year is greater than the surcharge threshold for the financial year. No surcharge is payable by residents of external Territories (3) Surcharge is not payable for a financial year if the person who would be liable to pay the surcharge is a Territory resident for the purposes of Division 1A of Part III of the Income Tax Assessment Act as it applies to the year of income that comprises that financial year.

Surchargeable contributions

9 Surchargeable contributions

Application (1) This section explains what are the surchargeable contributions of a member for a financial year and how they are to be worked out. Member other than a member of a defined benefits superannuation scheme (2) If: (a) there are any contributed amounts for a financial year in relation to a member other than a member of a defined benefits superannuation scheme; and (b) the constitutionally protected superannuation fund is a complying superannuation fund for the purposes of the year of income comprising the financial year; the surchargeable contributions of the member for the financial year are the sum of: (c) so much of the amounts referred to in subparagraph (a)(i) of the definition of contributed amounts in section 38 as: (i) are taxable contributions under subparagraph 274(1)(a)(i), (b)(ii), (ba)(i) or (ba)(iv) or paragraph 274(1)(d) or (e) of the Income Tax Assessment Act; or (ii) are allowed as deductions to the member under section 82AAT of that Act; or (iii) subject to subsection (3), constitute amounts accrued after 20 August 1996 that are eligible termination payments under paragraph (a) of the definition of eligible termination payment in subsection 27A(1) of that Act and are rolled‑over on or after 1 July 1997; and (d) any amounts referred to in subparagraph (a)(ii) or (iii) of the definition of contributed amount in section 38. (3) If an eligible termination payment within the meaning of subparagraph (2)(c)(iii) has been made or is made to or for a taxpayer after 20 August 1996, surcharge is payable only on the part of the reduced amount of the eligible termination payment that is worked out using the formula: Start formula start fraction Post-20 August 1996 period over Total period end fraction times Eligible termination payment end formula where:

post‑20 August 1996 period means the number of days in the period of the taxpayer’s employment for which the eligible termination payment was made that occurred after 20 August 1996.

reduced amount of an eligible termination payment is the amount remaining after deducting from the amount of the payment any post‑June 1994 invalidity component or CGT exempt component of the payment or any part of the payment that was made from an employee share acquisition scheme.

total period means the number of days in the period of the taxpayer’s employment for which the eligible termination payment was made.

Member of defined benefits superannuation scheme (4) The surchargeable contributions for a financial year of a member of a defined benefits superannuation scheme are the amounts that constitute the actuarial value of the benefits that accrued to, and the value of the administration expenses and risk benefits provided in respect of, the member for the financial year. Value of benefits and expenses—financial year earlier than 1999‑2000 financial year (5) The actuarial value of the benefits that accrued to, and the value of the administration expenses and risk benefits provided in respect of, a member of a defined benefits superannuation scheme for the 1996‑97 financial year or for either of the next 2 financial years is the amount worked out using the formula: Start formula Annual salary times Notional surchargeable contributions factor end formula where:

annual salary means:

(a) if paragraph (b) does not apply—the amount that is the member’s annual salary for the financial year; or
(b) if another amount is taken to be the member’s annual salary for the purposes of the scheme as it applies to the member for the financial year—that other amount.

notional surchargeable contributions factor means the factor applying to the member for the financial year worked out by an eligible actuary in accordance with:

(a) the method set out in Superannuation Contributions Ruling SCR 97/1; or
(b) if the Commissioner approves in writing another method as being appropriate in relation to the member for the financial year, being a method that excludes contributions made by the member for which the member is not entitled to an income tax deduction under the Income Tax Assessment Act or under the Income Tax Assessment Act 1997—the method so approved.

Value of benefits and expenses—1999‑2000 financial year or a later financial year (6) The actuarial value of the benefits that accrued to, and the value of the administration expenses and risk benefits provided in respect of, a member of a defined benefits superannuation scheme for the 1999‑2000 financial year or a later financial year is an amount worked out using: (a) the method set out in the regulations, being a method that excludes Government co‑contributions made under the Superannuation (Government Co‑contribution for Low Income Earners) Act 2003 and contributions made by the member for which the member is not entitled to an income tax deduction under the Income Tax Assessment Act or under the Income Tax Assessment Act 1997; or (b) if the Commissioner approves in writing another method as being appropriate in relation to the member for the financial year, being a method that excludes Government co‑contributions made under the Superannuation (Government Co‑contribution for Low Income Earners) Act 2003 and contributions made by the member for which the member is not entitled to an income tax deduction under the Income Tax Assessment Act or under the Income Tax Assessment Act 1997—the method so approved. Regulations (7) Regulations made for the purposes of paragraph (6)(a) may specify, or make provision for the Commissioner to specify in writing, different methods in relation to different superannuation schemes, different classes of superannuation schemes or different classes of members of a superannuation scheme. Transitional provision for 1996‑97 financial year (8) For the 1996‑97 financial year, a member’s surchargeable contributions are to be worked out only for the part of that financial year that started immediately after 7.30 pm by legal time in the Australian Capital Territory on 20 August 1996. Reduced surchargeable contributions (9) The amount of the surchargeable contributions of a member for a financial year is the amount worked out under subsection (2) or (4) (as appropriate), reduced by the amount worked out under subsection (10), if: (a) an eligible termination payment is made to the member in the financial year from the constitutionally protected superannuation fund; and (b) the eligible termination payment has an excessive component. (10) The amount of the reduction is worked out as follows:

Amount of the reduction

Step 1. Work out the amount that would have been the taxed element of the retained amount of the post‑June 83 component of the eligible termination payment if the amount of the excessive component of the eligible termination payment had been nil.

Step 2. Work out the taxed element of the retained amount of the post‑June 83 component of the eligible termination payment.

Step 3. Subtract the result of step 2 from the result of step 1.

Step 4. Divide the result of step 3 by 0.85.

Step 5. Subtract the result of step 3 from the result of step 4.

Step 6. Add the result of step 5 to the excessive component of the eligible termination payment.

Step 7. Identify the amount of the surchargeable contributions (apart from subsection (9)) of the member reported for the financial year by the entity that paid the eligible termination payment.

Step 8. Identify the lesser of the results of steps 6 and 7 (or either result if they are the same).

Surcharge threshold

10 Surcharge threshold

Surcharge threshold for 1996‑97 financial year (1) The surcharge threshold for the 1996‑97 financial year is $70,000. Surcharge threshold for later financial year (2) The surcharge threshold for a later financial year is the amount calculated using the formula: Start formula Previous surcharge threshold times Indexation factor end formula where:

previous surcharge threshold means the surcharge threshold for the financial year immediately before the financial year for which the surcharge threshold is being calculated.

indexation factor means the number calculated under subsections (4) and (5) for the financial year for which the surcharge threshold is being calculated.

Rounding off of amount of surcharge threshold (3) If an amount worked out for the purposes of subsection (2) is an amount of dollars and cents: (a) if the number of cents is less than 50—the amount is to be rounded down to the nearest whole dollar; or (b) otherwise—the amount is to be rounded up to the nearest whole dollar. Indexation factor (4) The indexation factor for a financial year is the number, calculated to 3 decimal places, using the formula: Start formula start fraction Index number for last quarter in current March year over Index number for last quarter in previous March year end fraction end formula where:

index number, for a quarter, means the estimate of full‑time adult average weekly ordinary time earnings for the middle month of the quarter published by the Australian Statistician.

current March year means the period of 12 months ending on 31 March immediately before the financial year for which the surcharge threshold is being calculated.

previous March year means the period of 12 months immediately before the current March year.

Rounding up of indexation factor (5) If the number calculated under subsection (4) for a financial year would, if it were worked out to 4 decimal places, end with a number greater than 4, the number so calculated is increased by 0.001. Change in index numbers (6) If at any time, whether before or after the commencement of this Act, the Australian Statistician has published or publishes an index number for a quarter in substitution for an index number previously published for the quarter, the publication of the later index number is to be disregarded. Surcharge threshold to be published (7) The Commissioner must publish before, or as soon as practicable after, the start of the 1997‑98 financial year, and before the start of each later financial year (being a financial year that ends before 1 July 2005), the surcharge threshold for the financial year.

Note: For the purposes of this section, Australian Statistician means the Australian Statistician referred to in subsection 5(2) of the Australian Bureau of Statistics Act 1975.

Member liable to pay surcharge

11 Member liable to pay surcharge

(1) The superannuation contributions surcharge on a member’s surchargeable contributions for a financial year is payable by the member. No surcharge payable if member dies (2) However, surcharge is not payable on surchargeable contributions for a member for a financial year in which the member dies or a later financial year.

Part 3

Assessment and collection of surcharge

Part 3—Assessment and collection of surcharge

Superannuation providers to give statements

12 Superannuation providers to give statements

Application (1) This section applies in respect of every member. Superannuation provider to give statement to Commissioner at end of financial year (2) Each superannuation provider must, after the end of each financial year (being a financial year that ends before 1 July 2005) but not later than the notification date for the financial year or such later date (if any) as the Commissioner allows, give the Commissioner, in respect of each person who, at the end of the financial year, was a member of the constitutionally protected superannuation fund of which the provider was the trustee, a statement setting out: (a) the member’s name, the address of the member’s place of residence or place of business or employment, the date of the member’s birth and, if given to the provider in connection with the operation or the possible future operation of this Act, the member’s tax file number; and (b) the particulars referred to in subsection (5); and (c) any other matters required by the regulations. Superannuation provider that pays out contributed amounts (3) If, after 7.30 pm by legal time in the Australian Capital Territory on 20 August 1996 and before 1 July 2005, any of the contributed amounts in relation to the member were or are paid by a superannuation provider: (a) to the member; or (b) to the member, or to a person other than a member, under a payment split; then the provider must, not later than the notification date for the financial year in which the payment was or is made or such later date (if any) as the Commissioner allows, give the Commissioner a statement setting out: (c) the member’s name, the address of the member’s place of residence or place of business or employment, the date of the member’s birth and, if given to the provider in connection with the operation or the possible future operation of this Act, the member’s tax file number; and (d) the particulars referred to in subsection (5); and (e) the date of the payment; and (f) any other information required by the regulations. Information to be given to member (4) A superannuation provider who is required to give a statement to the Commissioner under subsection (2) or (3) for a financial year earlier than the 1998‑99 financial year must, not later than 12 months after the statement is given, give to the member the particulars referred to in subsection (5) that are required to be included in the statement. Member may request provider to give particulars (4A) If a member requests a superannuation provider who has given a statement to the Commissioner under this section for the 1998‑99 financial year or a later financial year to give to the member the particulars referred to in subsection (7) relating to the member that are included in the statement (other than particulars that the provider has previously given to the member), the provider must comply with the request within 30 days after receiving it. How particulars are to be given (4B) The particulars to be given to a member under subsection (4A) are to be given: (a) if the request asked for them to be given in writing—in writing; or (b) otherwise—in such manner as the superannuation provider considers appropriate. Particulars to be included in statements (5) The particulars that are required to be given in a statement under this section are the total of the contributed amounts (if any) in relation to the member for the financial year and: (a) if the statement is given by a superannuation (accumulated benefits) provider: (i) if any of those amounts are amounts referred to in subparagraph (a)(i) of the definition of contributed amounts in section 38—the total of so much of those amounts as are taxable contributions referred to in subparagraph 9(2)(c)(i); and (ii) the total of any of those amounts that are amounts referred to in subparagraph (a)(ii) or (iii) of that definition; and (b) if the statement is given by a superannuation (defined benefits) provider—the amount of the surchargeable contributions of the member for the financial year. (6) If: (a) a superannuation benefit (within the meaning of the Income Tax Assessment Act 1997) becomes payable by a superannuation provider for the benefit of a member; or (b) a payment split applies to a splittable payment in respect of an interest that a person has as a member; (being a member who was a member at any time after 7.30 pm by legal time in the Australian Capital Territory on 20 August 1996 and before 1 July 2005), then the provider must give the Commissioner a statement setting out: (c) the member’s name, the address of the member’s place of residence or place of business or employment, the date of the member’s birth and, if given to the provider in connection with the operation or the possible future operation of this Act, the member’s tax file number; and (d) the date on which the superannuation benefit became payable; and (e) the particulars in relation to the benefits referred to in paragraph 15(6)(b) or (6AA)(d) (as the case requires); and (f) any other information required by the regulations. Particulars to be included in statement under subsection (6) (7) The statement required to be given by a superannuation provider to the Commissioner under subsection (6) is to be given before: (a) if the provider is informed by the member, on or before the tenth day of the month after the month (the payment month) in which the lump sum was paid or the pension began to be paid, that: (i) the member had applied to the Commissioner for the issue of a tax file number; and (ii) the Commissioner had neither granted nor refused the application; the end of the 14th day of the second month after the payment month; or (b) otherwise—the end of the 14th day of the month after the payment month; or before the end of such further period as the Commissioner allows. Definitions (8) In this section:

payment split means a payment split within the meaning of Part VIIIB or VIIIC of the Family Law Act 1975.

splittable payment means a splittable payment within the meaning of Part VIIIB or VIIIC of the Family Law Act 1975.

Giving of information in certain form

13 Giving of information in certain form

Notice stating how information to be given (1) The Commissioner may, by notice published in the Gazette, set out the way in which information to be contained in a statement under section 12 is to be given. Date of effect of notice (2) The notice has effect on and after the day stated in the notice. Superannuation provider to comply with notice (3) If any of the information that a superannuation provider is required to give under section 12 is kept by or on behalf of the provider by a data processing device, the provider must give the information in a way set out in the notice. Exemption (4) The Commissioner may, by legislative instrument, exempt a superannuation provider from subsection (3).

Assessment of liability to pay surcharge

14 Assessment of liability to pay surcharge

Commissioner to assess surcharge (1) For each financial year (being a financial year that ends before 1 July 2005) for which there are surchargeable contributions for a member, the Commissioner must make an assessment that: (a) calculates the member’s adjusted taxable income; and (b) if the adjusted taxable income is greater than the surcharge threshold: (i) calculates the surchargeable contributions; and (ii) calculates the rate of surcharge that applies to the member; and (iii) specifies the amount of the surcharge payable or, if no surcharge is payable, states that a nil amount of surcharge is payable; and (c) if the adjusted taxable income is equal to or less than the surcharge threshold—states that a nil amount of surcharge is payable. What happens if member dies (2) If: (a) a member has died, whether before or after the commencement of this subsection; and (b) after the death an assessment was or is made of surcharge on the member’s surchargeable contributions for the financial year in which the member died or a later financial year; the assessment is taken not to have been made. Notice of assessment (3) When an assessment (including an amended assessment) is made, the Commissioner must, subject to subsection (4), give notice of the assessment: (a) if paragraph (b) does not apply—to the member; or (b) if the assessment: (i) relates to the period when the relevant superannuation fund was a constitutionally protected superannuation fund; and (ii) is made after that superannuation fund ceases to be a constitutionally protected superannuation fund; to the superannuation provider. No notice if nil amount assessed (4) The Commissioner is not required under subsection (3) to give a notice of an assessment if the assessment states that a nil amount of surcharge is payable. Particulars in notice of assessment (5) A notice of assessment must include particulars of the matters contained in the assessment under subsection (1). How a notice is to be given (6) A notice of assessment may be given in any manner prescribed by the regulations. Non‑compliance not to affect validity of assessment (7) The validity of any assessment is not affected by any non‑compliance with a provision of this Act.

When surcharge will become payable

15 When surcharge will become payable

Explanation of section (1) This section makes provision for the deferment of the liability of a member of a constitutionally protected superannuation fund to pay surcharge, and for interest to accrue on the deferred amount. Accounts to be kept (2) The Commissioner is to keep a surcharge debt account for each member of a constitutionally protected superannuation fund. Account to be debited for surcharge (3) The Commissioner is to debit the account for surcharge assessed to be payable on the member’s surchargeable contributions. Interest to be debited (4) If the member’s account is in debit at the end of a financial year, the Commissioner is to debit the account for interest on the amount by which the account is in debit, calculated at the Treasury bond rate for the last day of the financial year for bonds with a 10 year term. Rate of interest (5) The Treasury bond rate for the last day of a financial year for bonds with a 10 year term is: (a) if any Treasury bonds with that term were issued on that day—the annual yield on those bonds; or (b) otherwise—the annual yield on Treasury bonds with that term, as published by the Reserve Bank of Australia for that day. Payment to be made when benefit becomes payable (6) Subject to subsection (6AA), when a superannuation benefit (within the meaning of the Income Tax Assessment Act 1997) becomes payable by a superannuation provider for the benefit of a member whose surcharge debt account is in debit, the member is liable to pay to the Commissioner the lesser of: (a) the amount by which the account is in debit; or (b) the total of the following amounts: (i) 15% of the employer‑financed component of any part of the benefits payable to the member that accrued between 20 August 1996 and 1 July 2003; (ii) 14.5% of the employer‑financed component of any part of the benefits payable to the member that accrued in the 2003‑2004 financial year; (iii) 12.5% of the employer‑financed component of any part of the benefits payable to the member that accrued in the 2004‑2005 financial year. (6AA) If: (a) a payment split applies to a splittable payment in respect of an interest that a person has as a member; and (b) the splittable payment becomes payable in circumstances where the member’s surcharge account is in debit; then the member is liable to pay to the Commissioner the lesser of: (c) the amount by which the account is in debit; and (d) the total of the following amounts: (i) 15% of the employer‑financed component of any part of the benefits that would have been payable to the member but for the payment split and that accrued between 20 August 1996 and 1 July 2003; (ii) 14.5% of the employer‑financed component of any part of the benefits that would have been payable to the member but for the payment split and that accrued in the 2003‑2004 financial year; (iii) 12.5% of the employer‑financed component of any part of the benefits that would have been payable to the member but for the payment split and that accrued in the 2004‑2005 financial year. Payment to be made if fund ceases to be a constitutionally protected superannuation fund (6A) If a superannuation fund ceases to be a constitutionally protected superannuation fund at a time when a member’s surcharge debt account is in debit, the member is liable to pay to the Commissioner the lesser of: (a) the amount by which the account is in debit; or (b) the total of the following amounts: (i) 15% of the employer‑financed component of any part of the value of the age retirement benefits of the member when the fund ceased to be a constitutionally protected superannuation fund that accrued between 20 August 1996 and 1 July 2003; (ii) 14.5% of the employer‑financed component of any part of the value of the age retirement benefits of the member when the fund ceased to be a constitutionally protected superannuation fund that accrued in the 2003‑2004 financial year; (iii) 12.5% of the employer‑financed component of any part of the value of the age retirement benefits of the member when the fund ceased to be a constitutionally protected superannuation fund that accrued in the 2004‑2005 financial year. (7) If a member becomes liable to pay an amount to the Commissioner under subsection (6), (6AA) or (6A), the Commissioner must give the member a notice stating that the member is liable to pay the amount. The notice must contain the date on which it is issued. (8) The amount is payable within 3 months after the date of issue of the notice and the notice is to state that the amount is so payable. Payment of the amount results in a nil balance in the account.

Note: For provisions about collection and recovery of superannuation contributions surcharge and other related amounts, see Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953.

Person may direct superannuation provider to pay amount to Commissioner (8A) If: (a) a person is liable to pay an amount to the Commissioner under subsection (6) or (6AA); and (b) a superannuation benefit (within the meaning of the Income Tax Assessment Act 1997) is not payable by the superannuation provider for the benefit of the person because the person has become: (i) a member of another superannuation fund; or (ii) a member of an approved deposit fund; or (iii) the holder of an RSA; or (iv) the purchaser of an annuity from a life assurance company or from a registered organisation; the person may direct the trustee of the other superannuation fund or the approved deposit fund, the RSA provider, the life assurance company or the registered organisation to pay to the Commissioner the whole or a part of the amount referred to in paragraph (a) and to make any necessary reductions in the benefits to which the person would otherwise be entitled from the other superannuation fund, the approved deposit fund, or the RSA or to the amount of the annuity to which the person would otherwise be entitled. Member of former constitutionally protected superannuation fund may direct superannuation provider to pay amount to Commissioner (8AA) If a person is liable to pay an amount to the Commissioner under subsection (6A), the person may direct the superannuation provider to pay to the Commissioner the whole or a part of that amount and to make any necessary reductions in the benefits to which the person would otherwise be entitled. Superannuation provider to comply with direction (8B) A superannuation provider to whom a direction is given under subsection (8A) or (8AA) must comply with the direction. Surcharge debt may be reduced (9) The member may make payments to the Commissioner for the purpose of reducing the amount by which the surcharge debt account is in debit. What happens if debt reduced (10) If a member makes a payment under subsection (9), the Commissioner is to: (a) acknowledge receipt of the payment to the member; and (b) credit the payment to the surcharge debt account; and (c) notify the member of the revised balance of the surcharge debt account. Definitions (11) In this section:

payment split means a payment split within the meaning of Part VIIIB or VIIIC of the Family Law Act 1975.

splittable payment means a splittable payment within the meaning of Part VIIIB or VIIIC of the Family Law Act 1975.

15A

Periods within which assessments may be amended

15A Periods within which assessments may be amended

General provision (1) The Commissioner may, subject to this section, at any time amend an assessment of surcharge on a member’s surchargeable contributions by making such alterations or additions as the Commissioner thinks necessary, even though surcharge has been paid in respect of the assessment. Such an amendment may be made on the Commissioner’s own initiative or at the request of the member. Period for making further amendment (2) If: (a) an assessment has been amended in any particular in a way that effected a reduction in the amount of surcharge payable; and (b) for the purposes of making the amendment, the Commissioner accepted a statement made by or on behalf of a member; the Commissioner may, within 4 years from the date of service of the notice of the amended assessment, further amend the assessment in, or in respect of, that particular in a way that increases the amount of the surcharge payable to the extent that the Commissioner considers necessary. Period where avoidance of surcharge (3) Subject to this section, if there has been an avoidance of surcharge, the Commissioner may: (a) if the Commissioner is of the opinion that the avoidance of surcharge is due to fraud or evasion—at any time; or (b) in any other case—within 4 years from the date upon which the surcharge became due and payable under the assessment; amend the assessment by making such alterations or additions as the Commissioner thinks necessary to correct the assessment. Period where amendment reduces surcharge (4) An amendment effecting a reduction in the amount of surcharge payable under an assessment is not to be made after the end of 4 years from the date upon which the surcharge became due and payable under the assessment. Application or request for extension of period (5) If: (a) the Commissioner has begun an examination of the affairs of a member; and (b) the examination was not completed within the period within which the Commissioner may amend an assessment to which the examination relates under subsection (3) or, if that period has been extended by any previous order or orders of the Federal Court of Australia made under subsection (6), or by any previous consent or consents of the member given under subsection (7), within that period as so extended; the Commissioner may, before the end of the period referred to in paragraph (b) of this subsection, apply to the Federal Court for an order extending, or request the member to consent to the extension of, the period within which the Commissioner may amend the assessment under paragraph (3)(b). Court may extend period (6) If, on application made to the Federal Court of Australia in accordance with subsection (5), the Court is satisfied that it was not reasonably practicable, or it was inappropriate, for the Commissioner to complete the examination within the period referred to in paragraph (5)(b) because of any action taken by the member or any failure of the member to take action that it would have been reasonable for the member to take, the Court may make an order extending the period within which the Commissioner may amend the assessment under paragraph (3)(b) for such period as the Court considers appropriate. Member or provider may extend period (7) If a request is made to the member in accordance with subsection (5), the member may, by writing, consent to the extension of the period within which the Commissioner may amend the assessment under paragraph (3)(b) for such period as is specified in the instrument of consent. Meaning of take action (8) In subsection (6), a reference to action taken by a member includes a reference to the institution by the member of a proceeding before a court or tribunal. Period for further amendment reducing surcharge (9) If an assessment has, under this section, been amended in any particular, the Commissioner may, within 4 years from the date upon which surcharge became due under the amended assessment, make, in or in respect of that particular, such further amendment of the assessment as, in the Commissioner’s opinion, is necessary to effect such reduction in the amount of surcharge payable under the assessment as is just. Case when subsection (9) does not apply (10) Subsection (9) does not authorise the further amendment of an earlier further amendment of an assessment made under subsection (2). Assessment following application by member (11) If: (a) an application for an amendment of an assessment is made by a member within 4 years from the date upon which surcharge became due and payable under the assessment; and (b) the member has given to the Commissioner within that period all information needed by the Commissioner for the purpose of deciding the application; the Commissioner may amend the assessment when he or she decides the application even though that period has elapsed. How application for amendment is to be made (12) An application for amendment must be made in writing, on a data processing device or by way of electronic transmission and must be signed in accordance with the regulations. Information to be contained in application (13) An application for amendment must be given in the prescribed manner and contain the prescribed information. Certain other powers of amendment not affected (14) Nothing in this section prevents: (a) the amendment of an assessment in order to give effect to the decision upon any appeal or review; or (b) the amendment of an assessment by way of reduction in the amount of surcharge payable pursuant to an objection made against the assessment or pending any appeal or review; or (c) the amendment of an assessment under section 16.

Amendment of assessment if tax file number quoted or found out after assessment

16 Amendment of assessment if tax file number quoted or found out after assessment

Application (1) This section applies if: (a) an assessment of surcharge on the surchargeable contributions of a member for a financial year has been made; and (b) the member did not, before the assessment was made, quote his or her tax file number to the Commissioner in connection with the operation or the possible future operation of this Act and the Commissioner did not know the tax file number when the assessment was made; and (c) the assessed amount was more than it would have been if the member had quoted the tax file number to the Commissioner; and (d) after the assessment was made: (i) the member quoted the tax file number to the Commissioner in connection with the operation or the possible future operation of this Act; or (ii) the Commissioner found out the tax file number. Amendment of assessment (2) The Commissioner must amend the assessment to reduce the amount of surcharge to the amount that would have been payable if the Commissioner had known the tax file number when the assessment was made.

Amendment of assessments

17 Amendment of assessments

Application (1) This section applies if, after the making of an assessment of surcharge on a member’s surchargeable contributions for a financial year: (a) the member’s adjusted taxable income for the financial year is increased or reduced and the increase or reduction affects the member’s liability to pay the surcharge; or (b) the amount of the contributions is greater or less than the amount that was taken to be the amount of the contributions for the purposes of the assessment; or (c) the Commissioner is required or permitted under any other provision of this Act to amend the assessment. Additional application (2) This section also applies if: (a) under an assessment of surcharge on a member’s surchargeable contributions for a financial year, the rate of surcharge that applies to the member on particular surchargeable contributions for the financial year was assessed to be nil because paragraph 5(4)(e) of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997 applied to the member; and (b) the rate of surcharge that applies to the member on those contributions for that financial year is afterwards determined to be greater than nil. Commissioner may amend assessment (3) The Commissioner may amend the assessment to take account of any matter referred to in paragraph (1)(a), (b) or (c) or the matters referred to in subsection (2). Amendment increasing surcharge (4) If, as a result of the amendment of the assessment, the amount of surcharge is increased: (a) the Commissioner must debit the member’s surcharge debt account for the amount of the increase if none of the following has become payable by the relevant superannuation provider for the benefit of the member: (i) a lump sum; (ii) a pension; (iii) a superannuation benefit (within the meaning of the Income Tax Assessment Act 1997); or (b) if paragraph (a) does not apply—the amount of the increase is payable by the member within 3 months after the day on which the assessment is amended or within such further period as the Commissioner allows. Amendment reducing surcharge (5) If, as a result of the amendment of the assessment, the amount of surcharge is reduced: (a) the Commissioner must credit the account with the amount by which the surcharge is reduced if none of the following has become payable by the relevant superannuation provider for the benefit of the member and the member’s surcharge debt account is in debit: (i) a lump sum; (ii) a pension; (iii) a superannuation benefit (within the meaning of the Income Tax Assessment Act 1997); or (b) if paragraph (a) does not apply: (i) the amount by which the surcharge is reduced is to be applied in reduction of any liability of the member under this Act; and (ii) any amount remaining is to be repaid to the member. Section subject to section 15A (6) This section is subject to section 15A.

Liability to pay the general interest charge if liability increased by an amendment of an assessment

18 Liability to pay the general interest charge if liability increased by an amendment of an assessment

Liability to pay general interest charge (1) If an amendment of an assessment increasing a member’s liability to pay surcharge for a financial year is made, the member is liable to pay the general interest charge on the amount of the increase for each day in the period that: (a) started at the beginning of 15 June in the financial year; and (b) finishes at the end of the day before the amended assessment is made.

Note: The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953.

Amendment of nil assessment (3) If: (a) the Commissioner has calculated that no surcharge is payable by a member on the member’s surchargeable contributions for a financial year; and (b) the Commissioner afterwards makes an assessment of surcharge payable by the member on those contributions for the financial year; the assessment referred to in paragraph (b) is taken to be an amended assessment.

Tax file numbers

19 Tax file numbers

Commissioner may use any tax file numbers for purposes of this Act The Commissioner may use for the purposes of this Act a tax file number that has been provided for any other purpose under a law relating to taxation or superannuation.

Objections against assessments

20 Objections against assessments

Member may object against assessment (1) If: (a) an assessment of surcharge on a member’s surchargeable contributions is made; and (b) the member is dissatisfied with the assessment; the member may object against the assessment in the way set out in Part IVC of the Taxation Administration Act 1953. Matters on which Commissioner may rely in deciding an objection (2) In making a decision on the objection in so far as the objection relates to the calculation of the member’s adjusted taxable income, the Commissioner is entitled to rely on: (a) the latest assessment of the member’s taxable income under the Income Tax Assessment Act; and (b) the latest statement of the member’s surchargeable contributions given to the Commissioner by the superannuation provider.

Part 4

Recovery of unpaid surcharge, general interest charge or late payment penalty

Part 4—Recovery of unpaid surcharge, general interest charge or late payment penalty

Penalty for non‑payment of surcharge

21 Penalty for non‑payment of surcharge

Liability to pay general interest charge (1) If an amount of surcharge that a person is liable to pay remains unpaid after the time by which it is due to be paid, the person is liable to pay the general interest charge on the unpaid amount.

Note: The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953.

General interest charge period (2) The person is liable to pay the general interest charge on the unpaid amount for each day in the period that: (a) started at the beginning of the day by which the surcharge was due to be paid; and (b) finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid: (i) the surcharge; (ii) general interest charge on any of the surcharge. Commissioner’s right to sue not affected (5) This section does not prevent the Commissioner from suing for the recovery of any unpaid surcharge or late payment penalty at any time after it becomes due and payable.

Part 5

Administration

Part 5—Administration

General administration of Act

26 General administration of Act

The Commissioner has the general administration of this Act.

Note: An effect of this provision is that people who acquire information under this Act are subject to the confidentiality obligations and exceptions in Division 355 in Schedule 1 to the Taxation Administration Act 1953.

Annual report

27 Annual report

After the end of each financial year, the Commissioner must give the Treasurer a report on the working of this Act during the year for presentation to the Parliament.

Part 6

Miscellaneous

Part 6—Miscellaneous

Prohibition of avoidance schemes

30 Prohibition of avoidance schemes

A superannuation provider or fund trustee must not enter into, commence to carry out, or carry out, a scheme if the superannuation provider or fund trustee entered into, commenced to carry out, or carried out, the scheme or any part of the scheme with the intention that the scheme would result, or be likely to result, in the avoidance of the surcharge, including through the use of allocated surplus amounts.

Records to be kept and retained by superannuation provider

34 Records to be kept and retained by superannuation provider

Superannuation provider to keep records (1) A superannuation provider must keep records that record and explain all transactions and other acts engaged in by the provider, or required to be engaged in by the provider, under this Act. How records to be kept (2) The records must be kept: (a) in writing in the English language or so as to enable the records to be readily accessible and convertible into writing in the English language; and (b) so that any liability under this Act of a member of a constitutionally protected superannuation fund of which the provider is the trustee can be readily worked out. Period for retention of records (3) A superannuation provider who has possession of any records kept or obtained under or for the purposes of this Act must retain them until the end of 5 years after they were prepared or obtained, or the completion of the transactions or acts to which those records relate, whichever is the later. When records need not be kept (4) This section does not require a superannuation provider to retain records if the Commissioner has notified the provider that the retention of the records is not required.

Application of the Criminal Code

36 Application of the Criminal Code

Chapter 2 of the Criminal Code applies to all offences against this Act.

Regulations

37 Regulations

The Governor‑General may make regulations prescribing matters: (a) required or permitted by this Act to be prescribed; or (b) necessary or convenient to be prescribed for carrying out or giving effect to this Act; and, in particular, prescribing: (c) how statements are to be given to the Commissioner; and (d) penalties not exceeding a fine of 5 penalty units, for offences against the regulations.

Part 7

Interpretation

Part 7—Interpretation

Definitions

38 Definitions

In this Act, unless the contrary intention applies:

adjusted taxable income has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997.

allocated surplus amount, in relation to a member in relation to a financial year, means an amount that is allocated by the relevant superannuation (accumulated benefits) provider for the benefit of the member in respect of the financial year (other than an amount paid for or by the member to the provider) to the extent to which the allocated amount exceeds an amount that, in the opinion of an eligible actuary according to Australian actuarial practice, is reasonable having regard to:

(a) the amounts paid by or for the member to the provider; and
(b) the relevant constitutionally protected superannuation fund’s investment earnings relating to the member’s interest in the fund; and
(c) any other relevant matters.

assessment means an assessment made under subsection 14(1).

class: a single member may constitute a class of members and a single superannuation scheme may constitute a class of superannuation schemes.

Commissioner means the Commissioner of Taxation.

complying superannuation fund has the meaning given by section 45 of the Superannuation Industry (Supervision) Act 1993.

constitutionally protected superannuation fund has the same meaning as constitutionally protected fund has in the Income Tax Assessment Act 1997.

contributed amounts:

(a) in relation to a member (other than a member of a defined benefits superannuation scheme) for a financial year, means:
(i) any amounts paid for or by the member to, or otherwise credited or attributed to an account for the member by, a superannuation provider for the financial year other than amounts to which subparagraph (ii) or (iii) applies, less any part of such an amount that is, under the regulations, to be regarded as reasonably attributable to interest; and
(ii) if there are any regulations in force for the purposes of this subparagraph in respect of the financial year—any amounts referred to in the regulations that are credited, allocated or attributable to the member for the financial year less any part of such an amount that is, under the regulations, to be regarded as reasonably attributable to interest; and
(iii) if there are no regulations in force for the purposes of subparagraph (ii) and the financial year is later than the 1996‑97 financial year—any allocated surplus amount in relation to the member in respect of the financial year; or
(b) in relation to a member of a defined benefits superannuation scheme for a financial year:
(i) means the surchargeable contributions of the member for the financial year; and
(ii) includes any other amount that may be reasonably regarded as attributable to the member under the scheme for the financial year.

defined benefit member means a member entitled, on retirement or termination of his or her employment, to be paid a benefit defined, wholly or in part, by reference to either or both of the following:

(a) the amount of:
(i) the member’s salary at a particular date, being the date of the termination of the member’s employment or of the member’s retirement or an earlier date; or
(ii) the member’s salary averaged over a period before retirement;
(b) a stated amount.

defined benefits superannuation scheme means:

(a) a public sector superannuation scheme that:
(i) is a regulated superannuation fund or an exempt public sector superannuation scheme; and
(ii) has at least one defined benefit member; or
(b) a regulated superannuation fund (other than a public sector superannuation scheme):
(i) that has at least one defined benefit member; and
(ii) some or all of the contributions to which are not allocated to any individual member but are paid into and accumulated in a fund in the form of an aggregate amount.

Deputy Commissioner means the Deputy Commissioner of Taxation.

eligible actuary means a Fellow or Accredited Member of the Institute of Actuaries of Australia.

eligible termination payment has the same meaning as in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act.

excessive component of an eligible termination payment has the meaning given by subsection 27A(1) of the Income Tax Assessment Act.

exempt public sector superannuation scheme has the same meaning as in section 10 of the Superannuation Industry (Supervision) Act 1993.

funded defined benefits superannuation scheme means a defined benefits superannuation scheme that is not an unfunded defined benefits superannuation scheme.

general interest charge means the charge worked out under Part IIA of the Taxation Administration Act 1953.

Income Tax Assessment Act means the Income Tax Assessment Act 1936.

late payment penalty means general interest charge payable under section 21.

member means a member of a constitutionally protected superannuation fund and includes a person who has been a member of such a fund.

notification date means:

(a) for the 1996‑97 financial year—15 December 1997; or
(b) for a later financial year—31 October following the financial year.

post‑June 83 component of an eligible termination payment has the meaning given by section 27AA of the Income Tax Assessment Act.

public sector superannuation scheme means a scheme for the payment of superannuation, retirement or death benefits, where the scheme is established:

(a) by or under a law of a State; or
(b) under the authority of:
(i) the government of a State; or
(ii) a municipal corporation, another local governing body, or a public authority, constituted by or under a law of a State.

regulated superannuation fund has the same meaning as in the Superannuation Industry (Supervision) Act 1993.

retained amount of the post‑June 83 component of an eligible termination payment has the meaning given by section 27AC of the Income Tax Assessment Act.

rolled‑over has the meaning given by paragraph 27A(13)(a) of the Income Tax Assessment Act.

Second Commissioner means a Second Commissioner of Taxation.

superannuation (accumulated benefits) provider means a superannuation provider that is not a superannuation (defined benefits) provider.

Superannuation Contributions Ruling SCR 97/1 has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997.

superannuation contributions surcharge or surcharge means the tax imposed by the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997.

superannuation contributions surcharge threshold or surcharge threshold has the meaning given by section 10.

superannuation (defined benefits) provider means a superannuation (funded defined benefits) provider or a superannuation (unfunded defined benefits) provider.

superannuation fund means a public sector superannuation scheme.

superannuation (funded defined benefits) provider means a superannuation provider who is the trustee of a constitutionally protected superannuation fund established for the purposes of a funded defined benefits superannuation scheme.

superannuation provider means a trustee of a constitutionally protected superannuation fund.

superannuation (unfunded defined benefits) provider means a superannuation provider who is the trustee of a constitutionally protected superannuation fund established for the purposes of a superannuation scheme that is an unfunded defined benefits superannuation scheme.

surcharge: see superannuation contributions surcharge.

surchargeable contributions has the meaning given by section 9.

surcharge threshold: see superannuation contributions surcharge threshold.

taxable income of a member for a year of income means the member’s taxable income of that year of income as assessed under the Income Tax Assessment Act.

taxed element of the retained amount of the post‑June 83 component of an eligible termination payment has the meaning given by section 27AC of the Income Tax Assessment Act.

the 1996‑97 financial year means the financial year starting on 1 July 1996.

the 1997‑98 financial year means the financial year starting on 1 July 1997.

the 1998‑99 financial year means the financial year starting on 1 July 1998.

the 1999‑2000 financial year means the financial year starting on 1 July 1999.

trustee, in relation to a constitutionally protected superannuation fund, means:

(a) if there is a trustee (within the ordinary meaning of that expression) of the fund—the trustee; or
(b) otherwise—the person who manages the fund.

unfunded defined benefits superannuation scheme has the same meaning as in the Superannuation Contributions Tax (Assessment and Collection) Act 1997.

year of income means a year of income for the purposes of the Income Tax Assessment Act as that Act applies to individuals.

Source text: opening excerpt

Sourced from the Federal Register of Legislation (legislation.gov.au), CC BY 4.0.

Part 1 Preliminary

Part 1—Preliminary

1 Short title

This Act may be cited as the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997.

2 Commencement

This Act commences on the day on which it receives the Royal Assent.

3 Act to bind Crown

4 Extension to Norfolk Island

This Act extends to Norfolk Island.

5 Object of Act

6 Simplified outline of Act

The following is a simplified outline of this Act.

(e) The member is liable to pay the surcharge on the member’s surchargeable contributions for a financial year, but the surcharge is not payable before benefits become payable.

(f) If liability for surcharge is increased as a result of an amendment of an assessment, interest is payable on the additional surcharge.

(g) A member may object against an assessment of surcharge in the way set out in Part IVC of the Taxation Administration Act 1953 for objecting against assessments of income tax.

(h) A late payment penalty applies if surcharge is not paid on time.

7 Exclusion of certain members

This Act does not apply to a person who is a member because he or she is a judge of a court of a State at the commencement of this Act.

Part 2 Liability to surcharge

Part 2—Liability to surcharge

8 Superannuation contributions surcharge

9 Surchargeable contributions

post‑20 August 1996 period means the number of days in the period of the taxpayer’s employment for which the eligible termination payment was made that occurred after 20 August 1996.

reduced amount of an eligible termination payment is the amount remaining after deducting from the amount of the payment any post‑June 1994 invalidity component or CGT exempt component of the payment or any part of the payment that was made from an employee share acquisition scheme.

total period means the number of days in the period of the taxpayer’s employment for which the eligible termination payment was made.

annual salary means:

(a) if paragraph (b) does not apply—the amount that is the member’s annual salary for the financial year; or
(b) if another amount is taken to be the member’s annual salary for the purposes of the scheme as it applies to the member for the financial year—that other amount.

notional surchargeable contributions factor means the factor applying to the member for the financial year worked out by an eligible actuary in accordance with:

(a) the method set out in Superannuation Contributions Ruling SCR 97/1; or
(b) if the Commissioner approves in writing another method as being appropriate in relation to the member for the financial year, being a method that excludes contributions made by the member for which the member is not entitled to an income tax deduction under the Income Tax Assessment Act or under the Income Tax Assessment Act 1997—the method so approved.

Amount of the reduction

Step 2. Work out the taxed element of the retained amount of the post‑June 83 component of the eligible termination payment.

Step 3. Subtract the result of step 2 from the result of step 1.

Step 4. Divide the result of step 3 by 0.85.

Step 5. Subtract the result of step 3 from the result of step 4.

Step 6. Add the result of step 5 to the excessive component of the eligible termination payment.

Step 7. Identify the amount of the surchargeable contributions (apart from subsection (9)) of the member reported for the financial year by the entity that paid the eligible termination payment.

Step 8. Identify the lesser of the results of steps 6 and 7 (or either result if they are the same).

10 Surcharge threshold

previous surcharge threshold means the surcharge threshold for the financial year immediately before the financial year for which the surcharge threshold is being calculated.

indexation factor means the number calculated under subsections (4) and (5) for the financial year for which the surcharge threshold is being calculated.

index number, for a quarter, means the estimate of full‑time adult average weekly ordinary time earnings for the middle month of the quarter published by the Australian Statistician.

current March year means the period of 12 months ending on 31 March immediately before the financial year for which the surcharge threshold is being calculated.

previous March year means the period of 12 months immediately before the current March year.

Note: For the purposes of this section, Australian Statistician means the Australian Statistician referred to in subsection 5(2) of the Australian Bureau of Statistics Act 1975.

Plain English Summary

Deep Dive

What it does

Who it affects

Key duties and rights

Penalties and enforcement

How it interacts with other laws

Recent changes and why

Court challenges and controversies

Gotchas

How to comply

Current sections

Preliminary

Part 1—Preliminary

Short title

1 Short title

Commencement

2 Commencement

Act to bind Crown

3 Act to bind Crown

Extension to Norfolk Island

4 Extension to Norfolk Island

Object of Act

5 Object of Act

Simplified outline of Act

6 Simplified outline of Act

Exclusion of certain members

7 Exclusion of certain members

Liability to surcharge

Part 2—Liability to surcharge

Superannuation contributions surcharge

8 Superannuation contributions surcharge

Surchargeable contributions

9 Surchargeable contributions

Surcharge threshold

10 Surcharge threshold

Member liable to pay surcharge

11 Member liable to pay surcharge

Assessment and collection of surcharge

Part 3—Assessment and collection of surcharge

Superannuation providers to give statements

12 Superannuation providers to give statements

Giving of information in certain form

13 Giving of information in certain form

Assessment of liability to pay surcharge

14 Assessment of liability to pay surcharge

When surcharge will become payable

15 When surcharge will become payable

Periods within which assessments may be amended

15A Periods within which assessments may be amended

Amendment of assessment if tax file number quoted or found out after assessment

16 Amendment of assessment if tax file number quoted or found out after assessment

Amendment of assessments

17 Amendment of assessments

Liability to pay the general interest charge if liability increased by an amendment of an assessment

18 Liability to pay the general interest charge if liability increased by an amendment of an assessment

Tax file numbers

19 Tax file numbers

Objections against assessments

20 Objections against assessments

Recovery of unpaid surcharge, general interest charge or late payment penalty

Part 4—Recovery of unpaid surcharge, general interest charge or late payment penalty

Penalty for non‑payment of surcharge

21 Penalty for non‑payment of surcharge

Administration

Part 5—Administration

General administration of Act

26 General administration of Act

Annual report

27 Annual report

Miscellaneous

Part 6—Miscellaneous

Prohibition of avoidance schemes

30 Prohibition of avoidance schemes

Records to be kept and retained by superannuation provider

34 Records to be kept and retained by superannuation provider

Application of the Criminal Code

36 Application of the Criminal Code

Regulations

37 Regulations