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Edited version of your written advice
Authorisation Number: 1012828807410
Date of advice: 23 June 2015
Ruling
Subject: Lump sum superannuation payments - terminal medical condition
Question
Does your client satisfy the terminal illness condition requirements so that the exemption under section 303 10 of the Income Tax Assessment Act 1997 (ITAA 1997) applies to the lump sum superannuation payments received by your client?
Answer
No.
This ruling applies for the following period:
Income year ended 30 June 2014.
The scheme commences on:
1 July 2013.
Relevant facts and circumstances
Your client was diagnosed with a terminal medical condition in early 20XX.
A month following the diagnosis your client contacted their superannuation fund and was advised they needed to provide letters from a general practitioner and a specialist medical practitioner to prove their medical diagnosis.
X months after the diagnosis your client received two lump sum superannuation payments.
You state that your client did not follow the correct procedure to receive the lump sum payments under the terminal medical condition and that your client mistakenly believed the required letters were to assist in lodging your clients tax return at the end of the financial year.
In your private ruling application you provided two medical certificates. These certificates did were made more than six months after the lump sums were paid. Further, these certificates did not include details in relation to your client's life expectancy.
A month following your private ruling application you submitted two further medical reports.
Your client's condition remains non curative.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 303-10
Income Tax Assessment Act 1997 Subsection 307-5(1)
Income Tax Assessment Act 1997 Section 307-65
Income Tax Assessment Act 1997 Subsection 995-1(1)
Income Tax Assessment Regulations 1997 Regulation 303-10.01
Reasons for decision
Summary of decision
It is considered that at the time the superannuation lump sum payments were made to your client a terminal medical condition, for the purposes of the legislation, did not exist as certified by two medical practitioners in a medical certificate.
Consequently, the lump sum superannuation payments are assessable income.
Detailed reasoning
Section 303-10 of the ITAA 1997 sets out the tax treatment of a superannuation lump sum member benefit paid to members having a terminal medical condition. Section 303-10 of the ITAA 1997 states:
(1) This section applies to a *superannuation member benefit that:
(2) The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you when you receive the lump sum or within 90 days after you receive it.
In accordance with subsection 307-5(1) of the ITAA 1997, a superannuation member benefit is a payment to a person from a superannuation fund because the person is a fund member.
Further, a superannuation lump sum is defined in section 307-65 of the ITAA 1997 as a superannuation benefit that is not a superannuation income stream benefit.
Subsection 995-1(1) of the ITAA 1997 defines 'terminal medical condition' to have the meaning given by the regulations.
In accordance with regulation 303-10.01 of the Income Tax Assessment Regulations 1997 , a terminal medical condition exists in relation to a person at a particular time if:
(a) two registered medical practitioners have certified, jointly or separately, that the person suffers from an illness, or has incurred an injury, that is likely to result in the death of the person within a period (the certification period) that ends not more than 12 months after the date of the certification;
(b) at least one of the registered medical practitioners is a specialist practising in an area related to the illness or injury suffered by the person;
(c) for each of the certificates, the certification period has not ended.
In this case, your client received lump sum payments from two superannuation funds because they were a member of those funds. As such, the lump sum payments are superannuation member benefits.
In relation to the medical certificates provided in the private ruling application, they do not satisfy the conditions of the relevant legislation and regulation due to the fact they do not state that your client's life expectancy was less than 12 months.
Two further medical reports were submitted on behalf of your client. These two additional reports do not satisfy the conditions of the relevant legislation and regulation.
Accordingly, the Commissioner is unable to treat the taxable component of the lump sum payments as non-assessable non-exempt income.
Further to the above, it should be noted that where the conditions set in the terminal medical condition provisions are not met, the Commissioner has no discretion within those provisions to treat superannuation lump sum payments as non-assessable non-exempt income.