ATO Interpretative Decision
ATO ID 2002/155
Superannuation
Superannuation retirement & employment termination: Eligible termination payment (ETP) and ETP death benefit deceased estatesFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is an eligible termination payment (ETP) paid from a superannuation fund to a deceased taxpayer's estate exempt from tax?
Decision
Yes. The ETP would be exempt from tax provided it is paid to 'dependants' of the deceased taxpayer and provided that it does not exceed the deceased taxpayer's pension Reasonable Benefit Limit (RBL).
Reasons for Decision
The definition of a 'death benefit ETP' is found in subsection 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936) which generally defines it to mean an ETP that is a 'death benefit' within the meaning of section 27AAA of the ITAA 1936.
A 'death benefit ETP' paid to the trustee of the deceased's estate is either an Item 1 or Item 3 'death benefit ETP' in Table 1 of subsection 27AAA(2) of the ITAA 1936. Items 1 and 3 of Table 1 in subsection 27AAA(2) of the ITAA 1936 state the types of ETP payments (as defined in subsection 27A(1) of the ITAA 1936) that can be considered 'death benefit ETPs' when paid to the trustee of the taxpayer's estate. The table also directs under which subsection the dependant's tax concession (if any) is to be calculated.
Subsection 27AAA(3) of the ITAA 1936 sets out the dependant's concession for death benefit ETPs paid to the trustee of the estate. A 'dependant', for the purposes of subsection 27AAA(3) of the ITAA 1936 is defined in subsection 27A(1) of the ITAA 1936, as including a person who is or was the spouse of the person or a child of the person under the age of 18 years.
A death benefit ETP which is within the deceased's pension RBL and paid to the trustee of the deceased's estate (either as an Item 1 or 3 'death benefit ETP') is taxed in the hands of the trustee according to how the Commissioner considers the final distribution of the deceased estate would be made. Where payable to the dependants, then the benefits are tax exempt as long as the death benefit ETP does not exceed the deceased taxpayer's pension RBL.
Date of decision: 27 July 1998
Legislative References:
Income Tax Assessment Act 1936
subsection 27A(1)
section 27AAA
Other References:
Previously released as CDS10099
Keywords
ETP death benefit
ETP Excessive component
Eligible termination payments
ETP death benefit dependants
ETP death benefit deceased estates
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 27 July 1998 | Original statement |
| 1 February 2008 | Archived |