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Edited version of private ruling

Authorisation Number: 1011580928566

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Ruling

Subject: Superannuation death benefit

Is any part of a superannuation death benefit to be included in your assessable income for the 2008-09 income year?

Yes.

This ruling applies for the following period:

Year ended 30 June 2009

The scheme commenced on:

1 July 2008

Relevant facts:

The deceased resided by himself, prior to his death.

He had, until his death, been a fund member of an Australian complying superannuation fund (the Fund).

A letter issued by the Fund confirms that superannuation death benefit was paid to you as a 'non-financial dependant'.

A PAYG payment summary - superannuation lump sum was issued by the Fund during the income year. It discloses a gross death benefit paid to a non-financial dependent comprising of a tax free component, a taxed element of a taxable component and total tax withheld.

You stated that you received the total payment directly in your capacity as Executor of the deceased estate and the payment was immediately distributed amongst beneficiaries in accordance with the instructions of the deceased's will.

A copy of the will shows the beneficiaries of the deceased estate and how the estate is to be distributed.

Your individual income tax return for the income year included the taxed element of the superannuation death benefit in your assessable income.

You are over 60 years of age at the death of the deceased.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 302-140.

Income Tax Assessment Act 1997 Section 302-145.

Income Tax Assessment Act 1997 Subsection 302-145(1).

Income Tax Assessment Act 1997 Subsection 302-145(2).

Income Tax Assessment Act 1997 Subsection 302-195(1).

Income Tax Assessment Act 1997 Section 302-200.

Income Tax Assessment Act 1997 Section 307-5.

Reasons for decision

Summary

The superannuation death benefit was paid to you as a non-dependant of the deceased. Therefore, the taxable component of the superannuation death benefit is included in your assessable income for the income year.

The tax free component of the superannuation death benefit is not assessable income and is not exempt income.

Detailed reasoning

A payment from a complying superannuation fund to a person or to a trustee of a deceased estate after another person's death, because the deceased was a fund member, is classified as a superannuation death benefit under section 307-5 of the Income Tax Assessment Act 1997 (ITAA 1997).

Where the superannuation death benefit is paid to a non-dependant of the deceased - that is, a person who is not a death benefits dependant - the taxable component of the superannuation death benefit is included in assessable income (subsection 302-145(1) of the ITAA 1997). The tax free component of the superannuation death benefit is not assessable income and is not exempt income (section 302-140).

A person who is not a death benefits dependant is entitled to a tax offset that ensures that the rate of tax on the taxed element of the taxable component of the superannuation death benefit does not exceed 15% (subsection 302-145(2) of the ITAA 1997).

A death benefits dependant is defined under subsection 302-195(1) of the ITAA 1997 as a person who is:

A death benefits dependant also includes a person who was financially dependent upon the deceased person just before he or she died.

Two persons (whether or not related by family) have an interdependency relationship under section 302-200 of the ITAA 1997 if:

In making a superannuation benefit, the trustee of the superannuation fund is bound to follow the relevant clauses of the trust deed of the superannuation fund. The superannuation trustee is not bound by the deceased's instructions contained in the will, although the trustee may take such instructions into consideration when making the payment.

In your case, it is confirmed by the Fund in their letter that the superannuation death benefit was paid to you as a 'non-financial dependant' and not in your capacity as the executor of the deceased estate.

Consequently, as the superannuation death benefit was not paid to you in your capacity as the executor of the deceased estate, the taxable component is to be included in your assessable income for the income year.

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