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)?
Leave G1 blank. Go to H1 and H2.
Write at G1 the deductible amount for death benefit increases.
The SMSF is entitled to a 'death benefit increase' deduction for a member who died before 1 July 2017, if it:
- has been complying since 1 July 1988 or since its establishment (if later), and
- paid a super lump sum death benefit in 2017–18 to the trustee of the deceased member’s estate or to an individual who was the spouse, former spouse or child of the deceased at the time of death or payment, 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 the underlying 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 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 2010/5 describes a method for working out the amount of the tax saving amount.
For more information, see:
- Death of a member
- ATO Interpretive Decision ATO ID 2010/5 Complying superannuation fund: deduction for increased amount of superannuation lump sum death benefit
- ATO Interpretative Decision ATO ID 2012/10 Income Tax: anti detriment payments paid by a complying superannuation fund to a trustee of a deceased estate.
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 (see Note)
SMSF G is a complying SMSF that paid a super lump sum death benefit to the spouse of the deceased in 2017–18.
The lump sum of $100,000 is made up of:
- the member's account balance ($94,000 which is 100% taxable component)
- a 'tax savings amount' ($6,000 calculated using the formula in ATO Interpretative Decision ATO ID 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 rate (15%).
SMSF G reports $40,000 at G1 Death benefit increase.
Note: 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