Edited version of private ruling

Authorisation Number: 1011679116134

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: Death benefit

Is a payment made by a superannuation fund to a deceased estate after the death of the deceased in the 2010-11 income year assessed as a superannuation death benefit under section 302-10 of the Income Tax Assessment Act 1997 (ITAA 1997) if the deceased lodged a request, prior to the deceased's death in the 2010-11 income year, to withdraw all the deceased monies from the superannuation fund?

Yes.

This ruling applies for the following period

2010-11 income year

The scheme commenced on

1 July 2010

Relevant facts and circumstances

The deceased died during the 2010-11 income year.

Just prior to the date of death a request by power of attorney was completed electronically and lodged to withdraw all of the deceased's superannuation balance from the deceased's superannuation account with a superannuation fund (the Fund).

The Fund managed to sell down most of the underlying investments in the deceased's account and remitted monies to the deceased prior to the deceased's death.

At the time of the deceased's death, there was a residual amount remaining in the deceased's superannuation account due to underlying frozen investments. This amount will now be paid to the Estate.

The Estate will then distribute to non-dependants.

Relevant legislative provisions

Subsection 995-1(1) of the Income Tax Assessment Act 1997

Subsection 307-5(4) of the Income Tax Assessment Act 1997

Subsection 307-5(1) of the Income Tax Assessment Act 1997

Section 307-65 of the Income Tax Assessment Act 1997

Section 307-65 of the Income Tax Assessment Act 1997

Section 302-10 of the Income Tax Assessment Act 1997

Subsection 302-10(1) of the Income Tax Assessment Act 1997

Subsection 302-10(3) of the Income Tax Assessment Act 1997

Subsection 101A(3) of the Income Tax Assessment Act 1936

Subsection 302-145(2) of the Income Tax Assessment Act 1997

Subsection 302-145(3) of the Income Tax Assessment Act 1997

Reasons for decision

Summary

A payment made by a superannuation fund to a deceased estate after the death of the deceased is assessed as a death benefit under section 302-10 of the ITAA 1997. The taxation arrangements for the superannuation death benefits is determined in accordance with the taxation arrangements that would otherwise apply to the person or persons otherwise intended to benefit from the estate, that is, whether the beneficiary is a dependant or non dependant of the deceased.

Detailed reasoning

For superannuation death benefits paid after 1 July 2007, subsection 995-1(1) of the ITAA 1997 states that a 'superannuation death benefit' has the meaning given by section 307-5 of the ITAA 1997.

A superannuation death benefit is defined in subsection 307-5(4) of the ITAA 1997 as being a payment described in Column 3 of the table in subsection 307-5(1) of the ITAA 1997. A superannuation death benefit is described in Column 3 of Item 1 of the table in subsection 307-5(1) of the ITAA 1997 as:

A payment to you from a superannuation fund, after another persons death, because the other person was a fund member.

Section 302-10 of the ITAA 1997 deals with superannuation death benefits paid to the Trustee of the Deceased Estate. Subsection 302-10(1) of the ITAA 1997 states:

This section applies to you if:

· you are the trustee of a deceased estate, and

· you receive a superannuation death benefit in your capacity as trustee.

From the facts of the case, just prior to the date of death a request by power of attorney was completed and lodged with a superannuation fund (the Fund), to withdraw all of the deceased's superannuation account with the Fund. The Fund paid most of the monies to the deceased prior to the deceased's death. However, the Fund could not pay an amount due to underlying frozen investments. The deceased died during the 2010-11 income year with this amount remaining in the deceased's superannuation account.

Although the request was lodged prior to the date of death, because the member died prior to payment, the fund can only pay the benefits to the deceased's estate. The amount received after the deceased died is assessed under the income tax legislation regardless of the request between the deceased and the Fund.

The Fund will make a payment to the Trustee of the Deceased Estate during the 2010-11 income year because the deceased was a fund member. Hence the payment is a superannuation benefit within the meaning of Column 3 of Item 1 of the table in subsection 307-5(1) of the ITAA 1997.

The payment is a superannuation death benefit as defined in subsection 307-5(4) of the ITAA 1997 and a superannuation lump sum within the meaning of section 307-65 of the ITAA 1997. As the payment was made by the Fund after 1 July 2007, the provisions of Division 302 of the ITAA 1997 apply.

As the payment in this case will be a superannuation death benefit received from a superannuation fund by the Trustee of the Estate, section 302-10 of the ITAA 1997 will apply to the Trustee of the Estate.

Under section 302-10 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 estate. You have advised the persons that will benefit are not dependants of the deceased.

Where a person, who is not a death benefits 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. However, it is also clear that the non-dependant is not presently entitled to this superannuation death benefit at this time and it therefore does not form part of that non-dependants assessable income [subsection 302-10(3) of the ITAA 1997 and subsection 101A(3) of the ITAA 1936].

If the beneficiary is not considered to be a dependant of the deceased the Trustee of the Estate is subject to tax on the superannuation lump sum death benefit payment in accordance with subsection 302-10(3) of the ITAA 1997. However, a tax-offset under subsection 302-145(2) of the ITAA 1997 will apply to ensure that the rate of tax payable on the taxable component-taxed element will not exceed 15%. Subsection 302-145(3) of the ITAA 1997 will apply to ensure that the rate of tax payable on the taxable component-untaxed element will not exceed 30%.