Edited version of your written advice

Authorisation Number: 1013007176699

Date of advice: 4 May 2016

Ruling

Subject: Superannuation death benefits

Question

Will the payment of any superannuation death benefit to the trustee of a trust (the Trust) by a number of superannuation funds be a payment to a 'death benefits dependant' for the purposes of the Income Tax Assessment Act 1997 (ITAA 1997) and taxed under section 302-60 of the ITAA 1997?

Answer

Yes

This ruling applies for the following period

Income year ending 30 June 20XX

The scheme commenced on

1 July 20XX

Relevant facts and circumstances

The Deceased bequeathed their estate equally amongst their children (the Children) who are all under 18 years of age.

As a result of the Deceased's death, superannuation death benefits are payable from a number of complying superannuation funds (the Funds).

It is proposed that superannuation lump sum death benefits be paid from the Funds to the trustee of the Trust (the Trustee).

The Trust Deed of the Trust (the Trust Deed) provides that:

(a) the Trustee may distribute net income to all the beneficiaries or to one or more of the beneficiaries; or distribute all or part of the net income for the advancement maintenance education support or benefit of the beneficiaries;

(b) in exercising any discretion under clause 4.2. in favour of an infant beneficiary the Trustee may pay the amount to the guardian or other person who has the care or custody of a beneficiary, or to any parent of a beneficiary;

(c) the Trustee may pay transfer apply or set aside the whole or any part of the Fund to all the beneficiaries in equal shares; or pay transfer apply or set aside for the advancement maintenance education support or benefit of the beneficiaries;

(d) the Trustee cannot revoke, delete, or vary all or any of the trusts, powers or provisions of the deed to vary the beneficial interest of any person in respect of the income of the Fund distributed to the person; or to appoint or remove any person as a beneficiary; and

(e) beneficiaries means the Children:

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 302-60

Income Tax Assessment Act 1997 Section 302-195

Income Tax Assessment Act 1997 Section 307-5

Income Tax Assessment Act 1997 Section 307-15

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

Reasons for decision

Summary

Superannuation lump sum death benefit payments made by the Funds to the Trustee will be treated as payments to a 'death benefits dependant' as defined in section 302-195 of the ITAA 1997.

Therefore, in accordance with section 302-60 of the ITAA 1997, superannuation lump sum death benefits to be paid to the Trustee are not assessable income and not exempt income.

Detailed reasoning

Superannuation death benefits paid from complying superannuation funds

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.

The table in subsection 307-5(1) of the ITAA 1997 lists the various types of superannuation benefits and describes a 'superannuation death benefit' as:

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

In accordance with subsection 307-15(2) of the ITAA 1997, for the purposes of subsection 307-5(1) of the ITAA 1997, a payment is treated as being made to you, or received by you, if it is made:

(a) for your benefit; or

(b) to another person or to an entity at your direction or request.

In this case, as a result of the Deceased's death, superannuation benefits are to be paid from the Funds to the Trustee because the Deceased was a member of the Funds. As such, benefits to be paid to the Trustee are superannuation death benefits as defined in subsection 307-5(1) of the ITAA 1997.

Based on the terms contained in the Trust Deed, it is considered that superannuation lump sum death benefits to be paid to the Trustee would, in fact, be paid for the benefit of the Children. That view is based on the following:

(a) the Children are the only beneficiaries of the Trust;

(b) the Children have an absolute beneficial entitlement to any amounts held in the Trust;

(c) the Trustee cannot revoke, delete, or vary all or any provisions of the deed to vary beneficial interest of any person in respect of any income of the Fund distributed to that person; or to appoint or remove any person as a beneficiary; and

(d) there are no provisions in the Trust Deed through which the Children's beneficial interest in the Trust may be defeated.

Consequently, for the purposes of section 302-60 of the ITAA 1997, superannuation lump sum death benefit payments from the Funds to the Trustee will be treated as being made to, or received by, the Children.

Application of section 302-60 of the ITAA 1997

In accordance with section 302-60 of the ITAA 1997, a superannuation lump received by a person because of the death of a person of whom they are a 'death benefits dependant' is not assessable income and is not exempt income.

Relevantly, section 302-195 of the ITAA 1997 defines death benefits dependant of a person who has died as:

(a) the deceased persons *spouse or former spouse; or

(b) the deceased persons *child, aged less than 18; or …

*To find definitions of asterisked terms, see the Dictionary, starting at section 995-1

As the Children are all aged less than 18 years, they are each a death benefits dependant of the Deceased under paragraph 302-195(1)(b) of the ITAA 1997.

Thus, in this instance, superannuation lump sum death benefits are to be paid to the Trustee for the benefit of persons who are death benefits dependants of the Deceased. As such, these benefits are treated as being made to, or received by, the death benefits dependants of the Deceased.

Therefore, in accordance with section 302-60 of the ITAA 1997, superannuation lump sum death benefits to be paid from the Funds to the Trustee are not assessable income and are not exempt income.