ATO’s Taxation Determination 2014/7 came out on 9 April and was called “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 (Cth) (‘ITAA’)?”. In the light of the ATO’s directive, let us find out what situations does the statement “an asset can be segregated on the whole but not in parts” sound workable in.
Segregated Current Pension Asset
TD 2014/7 establishes that in cases where a bank account is solely held for the purpose of facilitating pensions (when they are due), the account can be termed as a segregated current pension account. So what will the norms be like in case of formal and informal sub-accounts? Let us shift the arc of the article towards six examples through which TD 2014/7 demonstrates how the guidelines may be implied.
Separate bank accounts catering to the pension and the accumulation phase
If a bank account and a term deposit of an SMSF is maintained in order to support pension and an alternate bank account maintained to cater to the accumulation phase of another member of the same SMSF, then the bank account and the term deposit dealing with the pension phase will be treated as a segregated current pension asset.
If a large bank account uses a sub-account for the purpose of benefitting various members of the SMSF, the sub-account used by a ‘pension’ member will be treated as a segregated current pension asset.
Cases of informal sub-accounts and accidental money transfer
Like the above two instances, the commissioner’s guidelines also refer to the treatment of an informal sub-account (and whether such informal partition lays enough grounds of segregation). It also deals with the question “what happens to a segregated bank account that accidently procures funds from an unsegregated asset.” The last example deals with accidental payment (for instance, payment of supervisory levy) from a segregated bank account. How such payment might impact the fate of the bank account in question.
Time-frame for setting off accidental fund transfer
It is worth noting that 28 days has been deemed as a reasonable time frame to alter, adjust, or set off accidental transfer of amount. The dates can be flexible.
Feel free to get in touch with me here in case you are unsure about your SMSF investments or are not too clear about any of the norms or guidelines of the ATO.