Edited version of private advice

Authorisation Number: 1052002906874

Although the outcome of this edited version remains unchanged, the reasoning in this record is no longer up to date.

Our current view and the factors we consider are published on our website at QC 42473 or QC 45254.

Date of advice: 20 July 2022

Ruling

Subject: Death benefits

Question 1

Was the payment made by the Deceased taxpayer's (the Deceased) Fund a superannuation death benefit for the purposes of subdivision 302 A of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

Question 2

Was the payment made by the Deceased's Fund a superannuation benefit defined in subsection 307-5(1) of the ITAA 1997?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Deceased was born during the 19XX-XX income year.

The Deceased gave written instructions to the financial adviser, to liquidate all SMSF investments and requested a payout/transfer of all super benefits to his personal bank account as lump sums.

The Deceased died on xxxxx 20XX.

Prior to the Deceased passing, the fund's asset's included:

a)    Bank cash account

b)    Investment Consolidator portfolio consisting of its own cash account and a pool of managed investments.

c)    held a mix of Account Based Pensions and an Accumulation account in this SMSF.

d)    The deceased's terminal condition was apparent to all relevant parties on or about xxxxx. Prognosis at that point, was days/weeks/months.

The Deceased gave written instructions to the financial adviser, to liquidate all SMSF investments and requested a payout/transfer of all super benefits to their personal bank account as lump sums.

The Deceased's financial adviser immediately placed sell orders on all investments.

Redemption proceeds started trickling into the cash account from xxx/2022 to xxx/2022.

In line with the:

•         Deceased's instructions pre-death, his financial adviser transferred lump sum payments from the cash account to the Deceased's personal account in four lots commencing on xxx/2022 to xxx/2022. This occurred as soon as he was able to.

•         The fund is seeking an ATO Private Ruling to confirm that this amount can be classified as Super Member Benefits to the Deceased as it was requested pre-death. Due to time delays associated with the redemption of investments this was not able to be paid immediately. However, it was paid directly to the member's account as soon as practicable.

The Deceased signed a Binding Death Benefit Nomination on xx 2022 for 100% of his member benefits in the fund to be distributed to his Estate.

Sell orders have been placed but due to lack of liquidity, the exact date/s of redemption cannot be confirmed at this point.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 302-A

Income Tax Assessment Act 1997 Section 307-5

Income Tax Assessment Act 1997 Subsection 307-5(1)

Income Tax Assessment Act 1997 Section 307-15

Reasons for decision

Subsection 995-1(1) of the ITAA 1997 states that a 'superannuation death benefit' has the meaning given by section 307-5 of the ITAA 1997.

Superannuation benefits are defined in section 307-5 of the ITAA 1997. In accordance with Item 1 of the table in subsection 307-5(1) of the ITAA 1997 a superannuation member benefit is a payment to you from a superannuation fund because you are a fund member;

Superannuation death benefit is defined in subsection 307-5(4) of the ITAA 1997 as being a payment described in Column 3 of the table in subsection 307-5(1). A superannuation death benefit is described in Column 3 of Item 1 of the table in subsection 307-5(1) as:

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

Section 307-15 of the ITAA 1997 applies for the purposes of determining whether a payment is made to you, or received by you, and states:

A payment is treated as being made to you, or received by you, if it is made:

a) for your benefit; or

b) to another person or to an entity at your direction or request.

In this case, the payment was made by the Fund to the Deceased's nominated savings account as requested by the Deceased immediately prior to death. As such, the payment is a superannuation member benefit paid by the Fund to the Deceased.

Upon receipt by the Deceased, this payment loses its character of superannuation member benefit and simply becomes money which is part of the Deceased's estate to be distributed to the Deceased's beneficiaries in accordance with their wishes.

Therefore, the payment made by the Fund to the Deceased's personal bank account is not a superannuation death benefit for the purposes of subdivision 302-A of the ITAA 1997.