ATO Interpretative Decision
ATO ID 2002/698
Superannuation
Retirement income entities - in-specie paymentFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Are there any limitations contained in the Superannuation Industry (Supervision) Act 1993 (SISA) that restrict a Self Managed Superannuation Fund (SMSF) from paying a member's benefit in specie rather than in cash?
Decision
No. There are no limitations in the SISA that prohibit a member's benefits being paid in specie provided a condition of release is first satisfied under the SISA.
Facts
The taxpayer is a member of a SMSF.
The taxpayer is over 55 and wishes to cease gainful employment and withdraw benefits from the fund.
Part of the assets of the fund comprises a property. The trustees wishes to transfer this property to the taxpayer as part of his member benefits.
Reasons for Decision
SISA and the SIS regulations provide rules on when and how a member's benefit may be paid from a superannuation fund. These rules ensure that a member's benefit is only paid in accordance with the payment and preservation standards and the superannuation fund's rules.
The transfer of property to a member in satisfaction of the member's benefit is not prohibited under the SISA. The Australian Prudential Regulation Authority issued Superannuation Circular No I.C. 2, which, in part, addresses this issue. Paragraph 9 of the circular provides that if the governing rules of a fund so provide, a member's benefits, are permitted to be paid in specie or in cash. However, the trustees must be able to substantiate the value of the relevant asset for the SISA and taxation purposes.
In specie payments cannot, however, (see paragraph 10 of Superannuation Circular No I.C. 2) be made where the payment relates to financial hardship or compassionate grounds.
Subsection 27A(8) of the Income Tax Assessment Act 1936 provides that where a transfer of property has been made to a person for the purposes of making an eligible termination payment, the transfer is deemed to be payment of an amount equal to the value of the property immediately before the transfer.
Date of decision: 18 June 2001
Legislative References:
Superannuation Industry (Supervision) Act 1993
The Act
subsection 27A(8) Related ATO Interpretative Decisions
This decision replaces ATO ID 2001/179.
Other References:
APRA Superannuation Circular No I.C.2
Keywords
Self managed superannuation funds
SIS payment standards
SIS payment standards - trustee obligations
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 18 June 2001 | Original statement |
| 29 July 2005 | Archived |