Edited version of private ruling

Authorisation Number: 1011660832732

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Taxation treatment of superannuation premiums -Total and Permanent Disability (TPD) product.

Issue 1

Question 1

Is the insurance policy entered into by the Fund wholly or partly for current or contingent liabilities of the fund to provide disability superannuation benefits for the purposes of paragraph 295-460(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Question 2

Is the premium deductible to the Fund under subsection 295-465(1) of the ITAA 1997, and if so, to what extent?

Answer

Yes. The premium payable under the policy will be deductible under subsection 295-465(1) of the ITAA 1997 to the full extent.

This ruling applies for the following periods:

Year ending 30 June 2009

Year ending 30 June 2010

Year ending 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

The scheme commences on:

1 July 2008

Relevant facts and circumstances

An insurance policy is held by the trustee of a superannuation fund. Under this policy TPD benefits are only paid where the insured person meets the 'any occupation' definition of TPD, and also meets the Superannuation Industry Supervision Act 1993 (SIS Act) definition of 'permanent incapacity, (this is the 'superannuation component" of the definition of TPD). Relevantly, for taxation purposes the cover provided would satisfy the definition of 'disability superannuation benefit' for the purposes of section 995-1 of the ITAA 1997.

Under the policy the trustee proposes to meet the premium payments, and would debit a member's account to reflect the cost of such premium.

Premiums are payable based on the rates table approved by the actuary for the policy and it has been determined by the actuaries on the basis of the risk borne under the policy.

Assumptions

The policyholder, [Trustee] as trustee of the Fund, is a complying superannuation fund for the purposes of the Act.

Benefits under the 'superannuation policy of the any occupation' and SIS TPD product are provided wholly in respect of disability benefits, upon the certification by at least 2 legally qualified medical practitioners that the insured is unable to be gainfully employed in any occupation.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 295-G

Income Tax Assessment Act 1997 Section 295-460

Income Tax Assessment Act 1997 Section 295-460(1)(b)

Income Tax Assessment Act 1997 295-465

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

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Issue 1

Question 1

A disability superannuation benefit as referred to in paragraph 295-460(b) of the ITAA 1997 is defined in section 995-1 as meaning a superannuation benefit if:

a) the benefit is paid to a person because he or she suffers from ill-health (whether physical or mental); and

b) 2 legally qualified medical practitioners have certified that, because of the ill-health, it is unlikely that the person can ever be gainfully employed in a capacity for which he or she is reasonably qualified because of education, experience or training.

The Product Disclosure Statement (PDS) states that TPD insurance provides a lump sum if the insured person suffers 'total and permanent disablement'.

The definition of 'total and permanent disablement' under the policy states that the insured person must meet the 'any occupation' definition and also meet the definition of permanent incapacity as defined in the SIS Act.

The policy can only ever give rise to a payment to the fund that would be a benefit referred to in paragraph 295-460(b) of the ITAA 1997.

It is therefore considered that the policy entered into by the fund is wholly for the current or contingent liabilities of the fund to provide a disability superannuation benefit as defined in paragraph 295-460(b) of the ITAA 1997.

Issue 1

Question 2

Summary

Subsection 295-465(1) of the ITAA 1997 provides:

A complying superannuation fund can deduct the proportions specified in this table of premiums it pays for insurance policies that are (wholly or partly) for current or contingent liabilities of the fund to provide benefits referred to in section 295-460 for its members. It can deduct the amounts for the income year in which the premiums are paid.

Item 5 of the table states that a fund can deduct that part of a premium that is specified in the policy as being wholly for the liability to provide benefits referred to in section 295-460 of the ITAA 1997.

Therefore, it is considered that the premium paid for the policy is wholly for the current or contingent liabilities of the fund to provide a benefit referred to in section 295-460 of the ITAA 1997 and the premium is deductible in full to the fund.

Conclusion

The policy entered into by the fund is wholly for current or contingent liabilities of the fund to provide disability superannuation benefits for the purposes of paragraph 295-460(b) of the ITAA 1997, and the premium paid for the policy is deductible to the fund in full under item 5 of the table in subsection 295-465(1) of the ITAA 1997.