ATO Interpretative Decision

ATO ID 2015/2 (Withdrawn)


Superannuation: superannuation benefits: Journal entry insufficient to constitute payment of a death benefit
  • This ATO ID has been withdrawn as ATO ID 2015/23 addresses the issue from a regulatory perspective.
    This document has changed over time. View its history.

Status of this decision: Decision Withdrawn 7 August 2015.
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.


Has a self-managed superannuation fund (SMSF) paid a superannuation death benefit to a taxpayer for the purposes of subsection 307-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997), on the death of a member, where the SMSF has prepared journal entries in its books detailing an amount as being transferred from the account of the deceased member to the account of the taxpayer?


No. To be a superannuation death benefit, the benefit must be paid to the taxpayer. Journal entries are insufficient to establish that a superannuation fund has paid a superannuation death benefit.


The two members of a SMSF consisted of a married couple. On the death of one member, the trustee of the SMSF decided that the remaining member (referred to as the taxpayer) should be paid a death benefit. The benefits of the deceased member consisted of publicly listed shares and cash.

The taxpayer wishes to remain in the superannuation fund and to re-contribute the death benefit directly to their member account. In order to avoid transaction fees, the taxpayer wishes to know whether it is possible to transfer the monies from the deceased member's account to the taxpayer's own account by way of journal entry.

Reasons for Decision

Subsection 307-5(4) of the (ITAA 1997) states that a superannuation death benefit is a benefit described in column 3 of the table in subsection 307-5(1) of the ITAA 1997. Item 1 of the table includes as a superannuation death benefit, a payment to a taxpayer from a superannuation fund, after another person's death, because the other person was a fund member.

The term 'payment' is not defined in the ITAA 1997. Therefore, to determine whether journal entries transferring the monies from the deceased member's account to the taxpayer's account represent a payment from a superannuation fund it is necessary to consider the common law meaning of the term.

The majority of cases that consider whether a journal entry is a payment refer to the principle stated in Re Harmony and Montague Tin & Copper Mining (Spargo's) (1873) LR 8 LR Ch App 407. In Spargo's it was held that a payment will occur where two parties both have a present liability or legal obligation to the other (mutual liabilities or mutual obligations) and they make an agreement and set off the liabilities against each other using a book entry.

The cases that have applied the principle in Spargo's have considered, among other things, whether there is a mutual liability or mutual obligation between the relevant parties.

In Case 18/97 97 ATC 227; AAT Case 11709 35 ATR 1074 (Case 18/97) it was held that where a superannuation fund has a present obligation to pay the member their accumulated credit either as a pension or lump sum, there is no present obligation on the part of the member and therefore there is no mutual obligation.

In the present case, the taxpayer is entitled to the deceased member's benefit. In order for the benefit to be characterised and taxed as a superannuation death benefit the SMSF must make a payment.

Based on the principle in Spargo's, a journal entry will only constitute a payment if there are mutual liabilities between the taxpayer and the SMSF and there is an agreement between those parties to set-off the liabilities. There is not a mutual liability in this case as the taxpayer does not have a liability to the SMSF (Case 18/97).

Therefore, a journal entry is not sufficient to establish that the SMSF has made a payment to the taxpayer under the provisions of subsection 307-5(1) of the ITAA 1997. As the SMSF has not made a payment to or on behalf of the taxpayer, the transaction does not represent, and therefore cannot be taxed as, a superannuation death benefit.

Note: To pay superannuation benefits to members by journal entries is also in conflict with subregulation 6.17(2) of the Superannuation Industry (Supervision) Regulations 1994 which requires that a member's benefits must be paid:

by being cashed in accordance with Division 6.3;
by being rolled over or transferred in accordance with Division 6.4; or
by being allotted under Division 6.7 (spouse contribution-splitting).

Journal entries are insufficient to satisfy the requirement that death benefits must be cashed (see ATO ID 2015/3).

Date of decision:  23 January 2015

Legislative References:
Income Tax Assessment Act 1997
   subsection 307-5(1)
   subsection 307-5(4)

Superannuation Industry (Supervision) Regulations 1993
   subregulation 6.17(2)

Case References:
Case 18/97
   97 ATC 227
   35 ATR 1074

AAT Case 11709
   35 ATR 1074
   97 ATC 227

Re Harmony and Montague Tin & Copper Mining
   [1861-73] All ER Rep 261
   (1872-73) LR 8 LR Ch App 407

Related ATO Interpretative Decisions
ATO ID 2015/3

Death benefits-superannuation benefits
Superannuation benefits
Self-managed superannuation funds
Superannuation contributions

Business Line:  Superannuation

Date of publication:  30 January 2015

ISSN: 1445-2782

  Date: Version:
  23 January 2015 Original statement
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