ATO Interpretative Decision
ATO ID 2001/751 (Withdrawn)
Income Tax
Payment of Superannuation Benefit to DependantFOI status: may be released
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This ATO ID is withdrawn from the database effective 1 July 2007 because it contains a view in respect of death benefit which have now been subsumed into section 302-10 of the Income Tax Assessment Act 1997. This ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2006-2007 income year.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 a superannuation payment paid to a trust, for a dependant who is an individual, a death benefit for the purposes of subsection 27AAA(4) of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. The payment is a death benefit in accordance with subsection 27AAA(4) of the ITAA 1936, notwithstanding the fact that the payment is made to the trust rather than directly to the dependant.
Facts
A payment on death is to be paid from a superannuation fund to a trust established for the dependant of the deceased. The dependant is the only beneficiary of the trust. In accordance with the trust deed, 'the Trustee shall stand possessed of the Trust Fund and the income thereof in trust for the Primary Beneficiary absolutely or if the Primary Beneficiary is deceased then the Trust Fund shall form part of the estate of the Primary Beneficiary'.
Reasons for Decision
To determine if the payment is a death benefit in accordance in subsection 27AAA(4) of the ITAA 1936, it is necessary to determine if the payment has been made to the dependant, notwithstanding the existence of the trust.
If a superannuation payment is made to a trustee, it is an Eligible Termination Payment (ETP), however its 'death benefit' tax concession is generally lost. However, the Australian Taxation Office (ATO) considers that a payment made direct to the trustee of a trust set up to benefit dependants of a deceased person will be death benefits.
This decision was reached by reference to section 15AA of the Acts Interpretation Act 1901, which provides that a construction that would promote the underlying purpose of the object of the Act (whether the object is expressly stated or not) must be preferred.
Provided the benefit is paid to or for the benefit of dependants of the deceased person, it will be exempt from tax. This appears to be a clear indication of the intent of both the legislators and the government in regards to the treatment of such payments. The fact that a payment is made directly to the trustee, rather than to the dependant, should not obscure the fact that the payment is ultimately for the benefit of the dependant.
As the taxpayer has an absolute entitlement to the income, is the sole beneficiary and any income on death would form part of the dependant's estate, the payment to the trust is ultimately for the benefit of the dependant. The payment is a death benefit for the purposes of subsection 27AAA(4) of the ITAA 1936.
Date of decision: 30 October 2001Year of income: Year ending 30 June 2002
Legislative References:
Income Tax Assessment Act 1936
subsection 27AAA(4)
section 15AA
Keywords
ETP death benefit dependants
ISSN: 1445-2782
| Date: | Version: | |
| 30 October 2001 | Original statement | |
| You are here | 1 February 2008 | Archived |