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Edited version of private advice

Authorisation Number: 1051917327040

Date of advice: 4 November 2021

Ruling

Subject: Superannuation death benefit

Issue 1

Question

Is the death benefit paid from the Fund paid to the Estate paid to a dependant of the Deceased in accordance with section 302-195 of the Income Tax Assessment Act 1997?

Answer

Yes

Issue 2

Question

Is the death benefit paid from the Fund paid to the Estate paid to a dependant of the Deceased in accordance with section 302-195 of the Income Tax Assessment Act 1997?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The Deceased died in 20XX.

The Beneficiary was the spouse of the Deceased.

The Beneficiary died in 20XX.

A superannuation death benefit was paid in July 20XX.

A superannuation death benefit was paid in September 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-10

Income Tax Assessment Act 1997 Section 302-60

Income Tax Assessment Act 1997 Section 302-145

Income Tax Assessment Act 1997 Section 302-195

Reasons for decision

Issue 1

Summary

A superannuation death benefit was paid to the estate of the Beneficiary in July 20XX as per section 302-10 of the ITAA 1997.

The payer of the superannuation death benefit classified the benefit as a taxable benefit.

A dependant relationship as defined under section 302-195 of the ITAA 1997 existed between the Deceased and the Beneficiary.

Consequently, the taxable component of the superannuation lump sum death benefit paid to the estate of the Beneficiary is not assessable income and is not exempt income as per section 302-60 of the ITAA 1997.

Detailed reasoning

Meaning of death benefits dependant

Division 302 of the ITAA 1997 sets out the taxation arrangements that apply to the payment of superannuation death benefits. These arrangements depend on whether the person that receives the superannuation death benefit is a dependant of the deceased and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit.

A superannuation death benefit is defined in section 307-5 of the ITAA 1997 as:

A payment to you from a superannuation fund, after another person's death, because the other person was a fund member.

Subsection 995-1(1) of the ITAA 1997 states that the term 'death benefits dependant' has the meaning given by section 302-195 of the ITAA 1997. Subsection 302-195(1) of the ITAA 1997 defines a death benefits dependant as follows:

A death benefits dependant, of a person who has died, is:

a)     the deceased person's spouse or former spouse; or

b)     the deceased person's child, aged less than 18; or

c)      any other person with whom the deceased person had an interdependency relationship under section 302-200 just before he or she died; or

d)     any other person who was a dependant of the deceased person just before he or she died.

Where a person who was a dependant of the deceased receives a superannuation death benefit paid as a lump sum, the death benefit is not assessable income and is not exempt income, under section 302-60 of the ITAA 1997.

Conclusion

The Beneficiary is a dependant as defined under section 302-195 of the ITAA 1997.

Section 302-60 of the ITAA 1997 confirms superannuation death benefit lump sums paid to dependants are tax free.

The superannuation death benefit paid in July 20XX to the estate of the Beneficiary is considered to be a tax free lump sum payment within the estate.

The trustee of the estate of the Beneficiary is not liable to withhold tax when this amount is redistributed to the beneficiaries of the estate

Issue 2

Summary

A superannuation death benefit was paid to the estate of the Beneficiary in September 20XX as per section 302-10 of the ITAA 1997.

The payer of the superannuation death benefit classified the benefit as a tax free benefit.

A dependant relationship as defined under section 302-195 of the ITAA 1997 existed between the Deceased and the Beneficiary.

Consequently, the superannuation lump sum death benefit paid to the estate of the Beneficiary is not assessable income and is not exempt income as per section 302-60 of the ITAA 1997.

Detailed reasoning

Meaning of death benefits dependant

Division 302 of the ITAA 1997 sets out the taxation arrangements that apply to the payment of superannuation death benefits. These arrangements depend on whether the person that receives the superannuation death benefit is a dependant of the deceased and whether the amount is paid as a lump sum superannuation death benefit or a superannuation income stream death benefit.

A superannuation death benefit is defined in section 307-5 of the ITAA 1997 as:

A payment to you from a superannuation fund, after another person's death, because the other person was a fund member.

Subsection 995-1(1) of the ITAA 1997 states that the term 'death benefits dependant' has the meaning given by section 302-195 of the ITAA 1997. Subsection 302-195(1) of the ITAA 1997 defines a death benefits dependant as follows:

A death benefits dependant, of a person who has died, is:

e)     the deceased person's spouse or former spouse; or

f)       the deceased person's child, aged less than 18; or

g)     any other person with whom the deceased person had an interdependency relationship under section 302-200 just before he or she died; or

h)     any other person who was a dependant of the deceased person just before he or she died.

Where a person who was a dependant of the deceased receives a superannuation death benefit paid as a lump sum, the death benefit is not assessable income and is not exempt income, under section 302-60 of the ITAA 1997.

Conclusion

The Beneficiary is a dependant as defined under section 302-195 of the ITAA 1997.

Section 302-60 of the ITAA 1997 confirms superannuation death benefit lump sums paid to dependants are tax free.

The superannuation death benefit paid in September 20XX to the estate of the Beneficiary is considered to be a tax free lump sum payment within the estate.

The trustee of the estate of the Beneficiary is not liable to withhold tax when this amount is redistributed to the beneficiaries of the estate.