Edited version of private advice

Authorisation Number: 1051635748596

Date of advice: 24 March 2020

Subject: Superannuation member benefits and tax free superannuation benefits

Question

Were the transfer of investments and the cash payment made from the self-managed superannuation fund to the deceased, a superannuation member benefit under subsection 307-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as well as a tax free superannuation benefit under section 301-10 of the ITAA 1997?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 2019

The scheme commenced on:

1 July 2018

Relevant facts and circumstances

1.         We received a private ruling application from your authorised legal representative about the transfer of investments and funds made from a self-managed superannuation fund to the deceased.

2.         In the private ruling application, we were advised that:

·  You are the Executor for a deceased estate.

·  The deceased was the sole member of a self-managed superannuation fund as well as the sole director of the corporate trustee of a self-managed superannuation fund.

·  The deceased suffered from a health event and entered into a coma.

·  Investments held by the self-managed superannuation fund were transferred from the self-managed superannuation fund to an account held in the name of the deceased.

·  A cash payment was paid from the self-managed superannuation fund to an account held in the name of the deceased.

·  The deceased later passed away.

·  A grant of probate was issued. It appointed you as the legal personal representative of the estate for the deceased.

3.         In the private ruling application, we were provided with the following supporting documentation:

·         The holdings statement for the deceased.

·         The ledger statement for the deceased.

·         A copy of the death certificate for the deceased.

·         A summary report of the portfolio held for the self-managed superannuation fund.

·         Grant of probate and the will of the deceased.

·         A completed Nomination of a legal representative to act on behalf of a non-individual entity form which appointed the authorised legal representative for the estate of the deceased.

·         A taxpayer's declaration which certified that the information provided to the authorised legal representative was true and correct and that they were authorised to submit a private ruling application on the taxpayer's behalf.

·         An agent declaration which certified that the documents provided by the authorised legal representative were prepared in accordance with the information supplied by the taxpayer. It also confirmed a declaration had been received from the taxpayer stating that the information provided in each document was true and correct and that they were authorised to submit the private ruling application on behalf of the taxpayer.

4.         In a telephone conversation between a tax officer from the Australian Taxation Office and your authorised legal representative, we acknowledged receipt of the private ruling application. We also confirmed that we had a 28 day service standard from the date all information was received.

5.         In a telephone conversation between a tax officer from the Australian Taxation Office and your authorised legal representative, we asked for clarification on your reasons for requesting a private ruling about the transfer of investments and funds from the self-managed superannuation fund to the deceased. We were advised that you required a private ruling because of the amount of investments and funds concerned and to:

·  Ensure that sufficient funds were left within the estate of the deceased to cover any potential tax liabilities which may arise.

·  Resolve any disputes among the beneficiaries.

6.         In the telephone conversation between a tax officer from the Australian Taxation Office and your authorised legal representative, we were also advised that the cash payment was completed by way of a journal entry by the financial advisor for the deceased. We confirmed the service standard was 28 days from the date all information was received.

7.         In a telephone conversation between a tax officer from the Australian Taxation Office and your authorised legal representative, we discussed the private ruling application we had received and the taxation of superannuation lump sums. We confirmed that there was insufficient evidence to establish whether a terminal medical condition existed.

8.         In another telephone conversation between a tax officer from the Australian Taxation Office and your authorised legal representative, we were advised that the private ruling application we had received did not concern whether a terminal medical condition existed but rather the taxation of superannuation lump sums.

9.         In a telephone conversation between a tax officer from the Australian Taxation Office and your authorised legal representative, we confirmed the question which would be answered as a result of the private ruling application we had received.

Assumption

10.      In the telephone conversation between a tax officer from the Australian Taxation Office and your authorised legal representative, we advised that we would need to make an assumption to action the private ruling application we had received.

11.      During the telephone conversation, your authorised legal representative agreed to the following assumption to action the private ruling application we had received:

·      All superannuation interests within the self-managed superannuation fund consisted solely of the tax free component and the taxed element.

Relevant legislative provisions

Income Tax Assessment Act 1997, subsection 307-5(1)

Income Tax Assessment Act 1997, subsection 307-65(1)

Income Tax Assessment Act 1997, section 301-10

Reasons for decision

Summary

12.      The transfer of investments and the cash payment from the self-managed superannuation fund to the deceased were a superannuation member benefit under subsection 307-5(1) of the ITAA 1997 and a tax free superannuation benefit under section 301-10 of the ITAA 1997.

Detailed reasoning

Division 301 of the ITAA 1997

13.      Division 301 of the ITAA 1997 sets out the tax treatment of superannuation benefits received by members of complying superannuation plans and how it varies based upon a member's age and when the benefit was received. It also confirms the tax treatment of departing Australia superannuation payments and certain payments less than $200.00.

14.      Section 301-10 of the ITAA 1997 states that a superannuation benefit is not assessable income and is not exempt income if it was received by a member who is 60 years of age or over. Subdivision 301-C of the ITAA 1997 explains the tax treatment of superannuation benefits that include an element untaxed in the fund.

Division 307 of the ITAA 1997

15.      Division 307 of the ITAA 1997 explains concepts relating to superannuation benefits, including the components of a superannuation benefit as well as the corresponding components of a superannuation interest. It also explains the element taxed in the fund and the element untaxed in the fund of a superannuation benefit, the low rate cap and the untaxed plan cap amount.

16.      Item 1 of the table in subsection 307-5(1) of the ITAA 1997 states that a superannuation member benefit is a payment from a superannuation fund that has been made to a person because they are a fund member.

17.      Item 1 of the table in subsection 307-5(1) of the ITAA 1997 also explains that a superannuation death benefit is a payment that has been made to a person from a superannuation fund, after the death of another person, because that other person was a fund member.

18.      Subsection 307-65(1) of the ITAA 1997 states that a superannuation lump sum is a superannuation benefit that is not a superannuation income stream benefit.

Application to your circumstances

19.      The transfer of investments from the self-managed superannuation fund to the deceased were a superannuation member benefit. They were transferred to her as a superannuation lump sum because she was a fund member, before she passed away.

20.      The cash payment from the self-managed superannuation fund to the deceased was also a superannuation member benefit. The cash payment was transferred to her as a superannuation lump sum because she was a fund member, before she passed away.

The transfer of investments and the cash payment from the self-managed superannuation fund to the deceased were also tax free superannuation benefits as she was over 60 years of age when she received them and all superannuation interests within the self-managed superannuation fund consisted solely of the tax free component and the taxed element.