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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of private advice

Authorisation Number: 1051534815105

Date of advice: 28 June 2019

Ruling

Subject: Superannuation death benefit

Question 1

For the purposes of section 302-10 of the Income Tax Assessment Act 1997 (ITAA 1997), is the Beneficiary a death benefits dependant of the Deceased under paragraph 302-195(1)(a) of the ITAA 1997?

Answer

Yes.

Question 2

Is the lump sum payment of the death benefit from the Deceased's estate tax-free to the Beneficiary under subsection 302-60 of the ITAA 1997?

Answer

Yes.

This ruling applies for the following period:

1 July 2018 to 30 June 2020

The scheme commences on:

1 July 2018

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

·        The Beneficiary was the spouse of the Deceased who died intestate.

·        A superannuation fund paid the Deceased's death benefit to an Estate.

·        Under a draft deed of settlement the Beneficiary shall be entitled to receive from the Estate the superannuation death benefit lump sum in full.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 302-10(1)

Income Tax Assessment Act 1997 subsection 302-10(2)

Income Tax Assessment Act 1997 section 302-60

Income Tax Assessment Act 1997 subsection 302-195(1)

Income Tax Assessment Act 1997 subsection 302-195(2)

Question1

Superannuation death benefits and dependency

In order for concessional tax treatment to apply to a superannuation death benefit, regardless of whether the benefit is paid to the trustee of the deceased estate or directly to the beneficiary, it must be established that the ultimate recipient of the benefit was a death benefits dependant of the deceased.

Subsection 302-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines the term death benefits dependant as follows:

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

(a) the deceased person's spouse or former spouse; or

(b) the deceased person's child, aged less than 18; or

(c) any other person with whom the deceased person had an interdependency relationship under section 302-200 just before he or she died; or

(d) any other person who was a dependant of the deceased person just before he or she died.

In this case, we accept that the Deceased was your spouse.

Superannuation death benefits paid to the Trustee of a deceased estate

Section 302-10 of the ITAA 1997 deals with superannuation death benefits paid to the trustee of a deceased estate. Subsection 302-10(1) states:

This section applies to you if:

(a) you are the trustee of a deceased estate; and

(b) you receive a superannuation death benefit in your capacity as trustee.

As the superannuation lump sum death benefit was made to the Trustee of the Estate, section 302-10 of the ITAA 1997 will apply.

In accordance with subsection 302-10(2) of the 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 deceased estate.

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

Question 2

Taxation of lump sum superannuation death benefits

Superannuation death benefits will be treated concessionally if a dependant of the deceased will benefit from the estate. Under section 302-60 of the ITAA 1997, where a person receives a superannuation lump sum death benefit and that person was a dependant of the deceased, the benefit is not assessable income and is not exempt income, that is, it is tax-free.

Accordingly, the proposed payment of the superannuation lump sum death benefit from the trustee of the Estate will be a tax-free payment to you.

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