ATO Interpretative Decision

ATO ID 2002/141 (Withdrawn)

Superannuation

• This ATO ID is withdrawn as a number of references are no longer current. It has been replaced by ATO ID 2015/3 Superannuation: death benefits: a member's benefits must be 'cashed' upon death.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Where the benefits of a deceased member of a self managed superannuation fund are paid as a death benefit to the taxpayer, does regulation 6.21 of the Superannuation Industry (Supervision) Regulations 1994 (SISR) allow the benefit to be transferred to the taxpayer's member account by way of journal entries in the books of the fund?

Decision

No. The death benefit must actually be paid to the taxpayer by transfer of ownership of the deceased member's assets to the taxpayer.

Facts

The taxpayer and the taxpayer's spouse are both members of the same self managed superannuation fund.

The taxpayer's spouse dies, and the spouse's benefits are to be paid out as a death benefit to the taxpayer. The benefits of the deceased member consist of publicly listed shares and cash.

The taxpayer wishes to remain in the 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 funds from the deceased member's account to the taxpayer's own account by way of journal entry.

Reasons for Decision

Subregulation 6.21(1) of SISR provides that a member's benefits in a regulated superannuation fund (other than the member's post-65 employer-financed benefits) must be 'cashed as soon as practicable' after the death of the member.

Subregulation 6.21(2) of SISR goes on to prescribe the forms in which the benefits may be cashed for the purposes of regulation 6.21 of SISR. In this case, the benefits may be cashed in any combination of one or more lump sums, pensions and purchased annuities. For the purposes of regulation 6.21 of SISR, but excluding Schedule 1, the definition of 'lump sum' includes an asset: subregulation 6.01(2) of SISR.

The term 'cashed' is not defined in the Superannuation Industry (Supervision) Act 1993 or in the SISR. However, the term has been interpreted in a manner that is consistent with its ordinary meaning. For instance, the Australian Prudential Regulation Authority (APRA) Superannuation Circular No. I.C.2 makes it clear that cashing necessarily involves the actual payment of the cash, assets or other consideration for the benefit of the beneficiary. Similarly, the use of the term within the SISR appears to suggest that in order to be 'cashed', the benefits need to be paid out of the superannuation system. Consequently, transferring the shares and cash to the taxpayer's account from the deceased member's account via a journal entry would not amount to 'cashing' the benefits, and therefore, regulation 6.21 of SISR would not be satisfied.

Legislative References:
Superannuation Industry (Supervision) Regulations 1994
   regulations 6.01
   regulations 6.21

Other References:
APRA Superannuation Circular No. I.C.2

Keywords
Death benefit ETP
Superannuation funds
Superannuation standards
Superannuation contributions

Business Line:  Superannuation

Date of publication:  8 February 2002
Date reviewed:  15 April 2014

ISSN: 1445-2782