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Edited version of private ruling
Authorisation Number: 1011681734277
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Ruling
Subject: Taxation of superannuation lump sum
Question
Will the taxable component of the superannuation lump sum you received be included in your assessable income?
Answer: Yes.
This ruling applies for the following periods:
Period ending 30 June 2011
The scheme commenced on:
1 July 2010
Relevant facts
You received a lump sum payment from your superannuation fund on the grounds of total and permanent disability.
You received a part A and part B payment.
You used this money to pay off your debts.
You have been told that the part A amount will be included in your assessable income for the 2011 financial year.
You were born after 30 June 1964.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 301-35
Superannuation Industry (Supervision) Regulations 1994 Clause 6.01
Reasons for decision
The assessable income of an Australian resident taxpayer includes all income derived directly or indirectly from all sources, whether in or out of Australia.
Section 301-35 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where a member is below preservation age when receiving a superannuation lump sum, the taxable component of the superannuation lump sum is assessable income.
Clause 6.01 of the Superannuation Industry (Supervision) Regulations 1994 provides that the preservation age is 60 years of age for a person born after 30 June 1964.
A tax offset under section 301-35 of the of the ITAA 1997 applies to ensure that the tax payable in respect of the element taxed in the fund will not exceed 20% plus Medicare levy and, if applicable, Medicare levy surcharge.
You were granted an early release of your superannuation benefits on the grounds of total and permanent disability. Because you were born after 30 June 1964 your preservation age is 60 years of age. Therefore you were below preservation age at the time you received the superannuation lump sum. As such, the taxable component of the lump sum will be included in your assessable income for the 2010-11 income year.
It should be noted that the Commissioner of Taxation does not have any discretionary powers to waive the imposition of tax in respect of an item of income.