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Edited version of your written advice

Authorisation Number: 1051295353835

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Date of advice: 16 October 2017

Ruling

Subject: Dependency

Question

Is the amount of the superannuation death benefit to be distributed to a beneficiary under the Will not assessable income and not exempt income?

Answer

Yes

This ruling applies for the following period

Year ended 30 June 2017

The scheme commenced on

1 July 2016

Relevant facts and circumstances

The Deceased passed away in the 2015-16 income year.

The beneficiary is a de-facto spouse of the Deceased at the time of death.

The Deceased’s estate received a superannuation lump sum benefit from an Australian superannuation fund (the Fund).

A PAYG payment summary – superannuation lump sum (the Summary) for the 2016-17 income year from the Fund shows a death benefit was made to the Deceased’s estate in the 2016-17 income year.

The Summary further shows the gross death benefit was comprised of a taxable component - taxed element, a taxable component - untaxed element and a tax free component.

The Deceased’s Will sets out how the Deceased’s estate is to be distributed.

A draft distribution statement sets out the amount each beneficiary is to receive from the Deceased’s estate.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 302

Income Tax Assessment Act 1997 Section 302-10

Income Tax Assessment Act 1997 Subsection 995-1(1).

Reasons for decision

Summary

The beneficiary is a death benefits dependant of the Deceased. Therefore, the superannuation death benefit made to the beneficiary, in accordance with the Will, is not assessable income and is not exempt income.

Detailed reasoning

Under section 302-10 of the Income Tax Assessment Act 1997 (ITAA 1997), the taxation arrangements for superannuation death benefits paid to a trustee of a deceased estate are determined in accordance with the taxation arrangements that would otherwise apply to the person or persons otherwise intended to benefit from the estate.

This means that where a dependant of the deceased is expected to receive part or all of a superannuation death benefit, it will be subject to tax as if it were paid to a dependant of the deceased, and the benefit is taken to be income to which no beneficiary is presently entitled.

Where a person that is not a dependant is expected to receive part or all of a superannuation death benefit, it will be subject to tax as if it were paid to a non-dependant of the deceased to that extent, and the benefit is taken to be income to which no beneficiary is presently entitled.

Where a person receives a superannuation death benefit and that person was a dependant of the deceased, it is not assessable income and is not exempt income.

Subsection 995-1(1) of the ITAA 1997 states that the term 'death benefits dependant' has the meaning given by section 302-195 of the ITAA 1997. Section 302-195 of the ITAA 1997 defines a death benefits dependant as follows:

A death benefits dependant, of a person who has died, is:

In this case, the beneficiary was the de-facto spouse of the Deceased at the time of death. Therefore, the de-facto spouse is a death benefits dependant of the Deceased. Accordingly, the superannuation death benefit made to the beneficiary, in accordance with the Will is not assessable income and is not exempt income.

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