Private ruling: Death benefit taxation
Date of advice: 27 April 2016
Published: June 2016
Ruling period: Year ending 30 June 2016.
Date scheme commenced: 1 July 2015

Ruling: Q1: Is the amount received from the deceased's spouse assessable income of the deceased estate? | A1: No.

Relevant facts and circumstances: Your application for private ruling which we received relates to the deceased who passed away intestate in 20XX. Documents provided with the private ruling application included a Settlement. The Settlement was drawn up between the deceased's spouse and the deceased's adult children. The relevant clauses in the Settlement state that all parties agree they will jointly request the trustee of the superannuation fund of the deceased to pay any of the deceased's superannuation and life insurance benefits to the estate of the deceased. Further, in the event the superannuation fund pays the deceased's superannuation or life insurance or death benefits to any of the parties, then the party shall pay the monies received from the superannuation fund to the estate of the deceased. The deceased's spouse received the death benefit payment from a superannuation fund. The deceased's spouse forwarded this payment to the estate. The estate distributed the amount to the beneficiaries.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 95(1)

Reasons for decision: Summary: Net income in relation to a trust is defined in subsection 95(1) of the Income Tax Assessment Act 1936 as the total assessable income of the trust derived during the income year, calculated as if the trustee were a resident taxpayer, less allowable deductions. In this case, the death benefit payment was not paid directly to the deceased estate. It was paid to the deceased's spouse. The spouse then forwarded the payment to the deceased estate so that it could be distributed according to the Settlement as agreed upon by all the beneficiaries. The payment received from the spouse does not have the characteristics of income in the hands of the estate. Therefore the payment is not assessable income of the estate.