• G1 Death benefit increase

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    Is the SMSF entitled to a deduction because the SMSF increased the amount paid as a super lump sum death benefit (a death benefit increase)?

    No

    Leave G1 blank. Go to H1 and H2.

    Yes

    Read on.

    Write at G1 the deductible amount for death benefit increases.

    The SMSF is entitled to a 'death benefit increase' deduction if it:

    • has been complying since 1 July 1988 or since its establishment (if later), and
    • paid a super lump sum death benefit in 2014–15 to the trustee of a deceased member’s estate or to a deceased member’s dependants, and
    • increased (or did not reduce) a super lump sum death benefit by an amount (the 'tax saving amount') so that the super lump sum death benefit amount is the amount the SMSF could have paid if no tax were payable on contributions.

    A 'death benefit increase' is also known as an 'anti detriment payment'.

    If the SMSF is entitled to a 'death benefit increase' deduction, work out the amount of the deduction by dividing the tax saving amount by the low tax component tax rate (15% for a complying SMSF).

    If the payment is made to the trustee of the deceased’s estate, the deduction is only available to the extent that the spouse, former spouse or child of the deceased can reasonably be expected to benefit from the estate.

    ATO ID 2010/05 describes a method for working out the amount of the tax saving amount.

    See also:

    Note:

    If the SMSF has exempt current pension income this does not affect the amount the SMSF is entitled to deduct for the death benefit increase. For more information see How are expenses treated when an SMSF has ECPI?

    Example: Death benefit increase for an SMSF, with or without ECPI*

    SMSF G is a complying SMSF that paid a super lump sum death benefit to the spouse of the deceased in 2014–15.

    The lump sum of $100,000 is made up of:

    • the member's account balance ($93,000 which is 100% taxable component)
    • a 'tax savings amount' ($6,000 calculated using the formula in ATO interpretive decision 2010/05).

    SMSF G calculates its death benefit increase deduction as $40,000:

    • the amount of the tax savings amount ($6,000)
    • divided by
    • the SMSF's low tax component tax rate (15%).

    SMSF G reports $40,000 at G1 Death benefit increase.

    * The amount of a death benefit increase that the SMSF can deduct is not affected by any exempt current pension income it makes.

    End of example
    Last modified: 15 Jan 2016QC 44344