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Edited version of your written advice

Authorisation Number: 5010050769603

Date of advice: 30 August 2018

Ruling

Subject: Deduction for future liability to pay death or disability benefits

Question

Can the trustee of a Fund (the Fund) claim a deduction for future liability to pay death benefits under s 295-470 ITAA 1997?

Answer

Yes

This ruling applies for the following:

Year ended 30 June 20xx

The scheme commences on:

1 July 20xx

Relevant facts and circumstances

The Fund has maintained life insurance for the member of the Fund (the member) and has always claimed a deduction for the life insurance premium under section 295-465 of the ITAA 1997

The life insurance benefit as well as the member’s superannuation balance at the time of the member’s death will be paid as a superannuation death benefit in consequence of the termination of the member’s employment to his dependent spouse.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 295-460.

Income Tax Assessment Act 1997 Section 295-465.

Income Tax Assessment Act 1997 Subsection 295-465(1).

Income Tax Assessment Act 1997 Subsection 295-465(4).

Income Tax Assessment Act 1997 Section 295-470.

ATO view documents

ATO ID 2015/17

Reasons for decision

A complying superannuation fund that provides benefits in relation to death, a terminal medical condition or disability, as detailed in section 295-460 of Income Tax Assessment Act 1997 (ITAA 1997), may claim a deduction under section 295-465 for a portion of the premiums that are paid for an insurance policy which covers these benefits.

Alternatively, if the trustee of a fund is entitled to a deduction under section 295-465 of the ITAA 1997, and makes a choice under subsection 295-465(4) not to claim the deduction, the trustee can claim a deduction under section 295-470 for future liability to pay the benefits in relation to death, a terminal medical condition or disability (the benefits).

Thus, in order to determine whether a fund can claim a deduction under section 295-470 of the ITAA 1997 consideration must first be given as to whether the fund is entitled to a deduction under section 295-465.

In this case the Fund did pay premiums in relation to an insurance policy which covers the types of benefits stated in section 295-460 as the Fund had an insurance policy for those types of benefits and accordingly it can claim a deduction under subsection 295-465(1) of the ITAA 1997.

Subsection 295-465(4) of the ITAA 1997 states:

The trustee may choose not to deduct amounts under this section for an income year and to deduct instead (under section 295-470) amounts based on the fund’s future liability to pay the benefits.

Section 295-470 of the ITAA 1997 states, amongst other matters, that a complying superannuation fund can deduct an amount for a future liability to pay benefits if:

Therefore the Fund can satisfy subsection 295-465(4) of the ITAA 1997 if it makes the relevant choice and it follows that the Fund can claim a deduction for future liability to pay benefits under section 295-470.

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