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Edited version of your written advice
Authorisation Number: 1051336370052
Date of advice: 14 February 2018
Ruling
Subject: Superannuation death benefits
Questions and answers
1. Will the superannuation death benefits payment received by the trustees of the estate and distributed to the beneficiaries of the estate be taxed only in the hands of the trustees under section 101A of the Income Tax Assessment Act 1936 and Division 302 of the Income Tax Assessment Act 1997?
Yes.
2. Will the trustees of the estate be entitled to a tax offset that ensures that the rate of income tax on the element taxed in the fund does not exceed 15%?
Yes.
This ruling applies for the following period:
Year ending 30 June 2018
The scheme commences on:
1 July 2017
Relevant facts and circumstances
The deceased passed away in the 20XX income year.
The estate of the deceased is being administered by the executors and trustees named in the will and probate has been granted.
The trustees of the estate are withdrawing the balance of the superannuation fund belonging to the deceased and will distribute the proceeds to the beneficiaries of the estate.
None of the beneficiaries of the estate are death benefit dependents of the deceased.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 101A
Income Tax Assessment Act 1936 subsection 101A(1)
Income Tax Assessment Act 1936 subsection 101A(3)
Income Tax Assessment Act 1997 Division 302
Income Tax Assessment Act 1997 section 302-10
Income Tax Assessment Act 1997 section 302-140
Income Tax Assessment Act 1997 section 302-145
Reasons for decision
Where the trustee of the estate of a deceased person receives any amount which would have been assessable income in the hands of the deceased person if it had been received by the person in their lifetime, that amount is included in the assessable income of the trust estate and is deemed to be income to which no beneficiary is presently entitled (subsection 101A(1) of the Income Tax Assessment Act 1936 (ITAA 1936)).
Subsection 101A(3) of the ITAA 1936 confirms that if an amount is included in the assessable income of a deceased taxpayer under Division 302 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of a superannuation death benefit payment received by the trustee of the estate, that amount is included in the assessable income of the trust estate.
A superannuation death benefit is a payment made from a superannuation fund to a person after another person’s death, because the other person was a member of the fund (section 307-5 of the ITAA 1997).
Section 302-10 of the ITAA 1997 provides that where a trustee of a deceased estate receives a superannuation death benefit and one or more of the beneficiaries of the estate who were not death benefits dependents of the deceased have benefited, or may be expected to benefit, from the death benefit:
● the benefit is treated as if it had been paid to the trustee as a person who was not a death benefits dependent of the deceased, and
● the benefit is taken to be income to which no beneficiary is presently entitled.
The taxable component of a superannuation lump sum that a non- death benefits dependant receives is assessable income (section 302-145 of the ITAA 1997) while the tax free component is not assessable income and is not exempt income (section 302-140 of the ITAA 1997).
Section 302-145 of the ITAA 1997 provides that the tax rates for someone who is a non-dependant are 15% for the element taxed in the fund and 30% for the element untaxed in the fund. The tax rates are maximum rates of tax. The entire taxable component of the lump sum death benefit is included in the non-dependant recipient's assessable income and a tax offset applies to effectively cap the maximum tax rate. The Medicare levy is not payable on a death benefit paid to a trustee of a deceased estate.
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