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Edited version of your written advice

Authorisation Number: 1013076606882

Date of advice: 8 September 2016

Ruling

Subject: Assessability of superannuation lump sum benefit released on compassionate grounds

Question

Is a superannuation lump sum benefit released on compassionate grounds assessable income?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2016

The scheme commences on:

1 July 2015

Relevant facts and circumstances

You applied for a release of superannuation through a third party to the relevant department on dd/mm/yyyy.

The reason for release was based on compassionate grounds.

The release was granted on dd/mm/yyyy as a Superannuation Lump Sum Payment.

The Superannuation Lump Sum Payment contained a taxable component.

The monies from the release were solely used to pay for expenses detailed in your application for release of superannuation.

You are under 60 years of age.

Relevant legislative provisions

Income Tax Assessment Act 1997 division 301.

Income Tax Assessment Act 1997 section 301-35.

Superannuation Industry (Supervision) Regulations 1994 regulation 6.01.

Reasons for decision

Taxation on a superannuation benefit

The tax treatment of superannuation member benefits paid from complying plans is outlined in division 301 of the Income Tax Assessment Act 1997 (ITAA 1997).

The tax treatment of the taxable component of a superannuation member benefit depends on the age of the member when they receive the benefit, the elements that comprise the component (i.e. taxed or untaxed) and the form of the payment (i.e. lump sum or income stream).

In your case, the superannuation lump received from the fund comprised a taxable component - taxed element; and at the time you received the lump sum you were under your preservation age which, in accordance with regulation 6.01 of the Superannuation Industry (Supervision) Regulations 1994, is 60 years.

Therefore, the taxable component of the relevant superannuation lump sums is assessable income under section 301-35(1) of the ITAA 1997 which states:

Discretion to vary the tax treatment of superannuation lump sums

The facts show that when the superannuation lump sum benefits were paid to you by the fund, you were less than 60 years of age. Because you had not reached your preservation age at the time the benefit was received, the taxable component-taxed element is included in your assessable income in accordance with subsection 301-35(1) of the ITAA 1997.

The wording in this section is quite specific and clearly states that taxpayers who are within a certain age range must include the amount of taxable component of the lump sum in their assessable income. As such, extraneous matters, such as the taxpayer's personal circumstances or the taxpayer's purpose for withdrawing the benefit, cannot be taken into account in determining the tax treatment.

Furthermore, there is no discretion under division 301 of the ITAA 1997 or elsewhere in the tax legislation that would allow the Commissioner to alter the rate of income tax prescribed by section 301-35 of the ITAA 1997. Therefore, the entire taxable component of the lump sum must be included in your assessable income for the relevant income year.

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