Private ruling: Superannuation - member benefits or death benefits
Date of advice: 13 April 2026
Published: 15 June 2026
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the lump sum cash paymentthat was transferred from the Superannuation Fund (the SMSF) to the Members personal account shortly before their death, a superannuation member benefit under subsection 307-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. | Q2: Is the lump sum amount from the sale of investment units from the SMSF to the Member, requested before the Members death but received after their death, a superannuation member benefit under subsection 307-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A2: No.

Relevant facts and circumstances: The Member was aged over 65 years at the date of death. The Member held two accounts within their SMSF. The Member had no death benefits dependants for the purpose of the ITAA 1997. The Member was the sole director of the corporate Trustee (the Trustee) at the time of their death. The Member verbally requested their POA to draft two letters to enact the following: • Authorising their accountant to wind up the SMSF and an overview of the instructions the Member has authorised the Members Children to undertake • A letter authorising the Members Children to sell all the shares and to make member payment(s) to the Member account and to leave an amount to wind up the SMSF. Documentation provided with the application or requested: • Bank statement from the Trustee account reflecting the cash payment(s) from the SMSF to the Member's personal bank account on Date A. • Bank Statement from the Trustee account reflecting the transfer from the SMSF to the Member's personal bank account on Date C and Date D. • The sale of units/shares. • The total net proceeds were available in the SMSF bank account, on Date B. • The last will and testament of the Member. • Power of Attorney (POA) documentation. • Trust Deed of the SMSF and Deed of Amendment. • Timeline of events. • Death Certificate. On Date A, two lump sum amounts were transferred from the Trustee account into the Member's personal account as was verbally instructed by the Member. The investment units were sold on the day the Member passed away under instructions from the POA. The Member passed away on Date A, at approximately XXXX as established by a phone call between the Members Children and the Members attending nurse. A copy of the death certificate has been provided. The Legal Personal Representative (LPR) then transferred amount(s) from the sale of the units received on Date B from the SMSF account to the Members personal account on Date C and Date D, (respectively).

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 301 | Income Tax Assessment Act 1997 Division 302 | Income Tax Assessment Act 1997 section 307-5 | Income Tax Assessment Act 1997 section 307-65 | Income Tax Assessment Act 1997 section 307-70 | Income Tax Assessment Act 1997 subsection 995-1(1) | Income Tax Assessment (1997 Act) Regulations 2021 Regulation 307-70.01 | Income Tax Assessment (1997 Act) Regulations 2021 Regulation 307-70.02 | Superannuation Industry (Supervision) Regulations 1994 Regulation 1.06 | Superannuation Industry (Supervision) Regulations 1994 Regulation 6.12 | Superannuation Industry (Supervision) Regulations 1994 Regulation 6.20 | Superannuation Industry (Supervision) Regulations 1994 Regulation 6.21 | Superannuation Industry (Supervision) Regulations 1994 Schedule 1 Part 1

Reasons for decision: Detailed Reasoning - Legislative framework - Conditions of release: The Member was over 65 at the date of their death. This meant the Member had already satisfied the condition of release in Schedule 1, item 106 of the table in Part 1 of the Superannuation Industry (Supervision) Regulations 1994 (SISR) by reaching the age of 65 years. This condition of release has 'nil' cashing restrictions. Under regulation 6.12 of the SISR, the member's benefits were all converted to unrestricted non-preserved benefits upon meeting a condition of release with 'nil' cashing restrictions. Under subregulation 6.20(1) of the SISR, a member's unrestricted non-preserved benefits in a regulated superannuation fund may be voluntarily cashed at any time. As per subregulations 6.20(2) and (3) of the SISR the whole or a part of the member's unrestricted non-preserved benefits may be cashed as one or more lump sums or one or more pensions. The Member's death on Date A then resulted in them meeting the condition of release in Schedule 1, item 102 of the table in Part 1 of the SISR. This condition of release also has 'nil' cashing restrictions. Under subregulation 6.21(1) of the SISR, a member's benefits in a regulated superannuation fund must be cashed as soon as practicable after the member dies. Paragraph 6.21(2)(a) dictates that benefits must be cashed as single lump sums or as an interim and final lump sum for non-dependants; only dependants (for SISR purposes) may cash benefits in the form of a superannuation income stream in the retirement phase, as per paragraph 6.21(2)(b) and subregulations 6.21(2A) and (2B) of the SISR. | Detailed Reasoning - Legislative framework - superannuation lump sums and superannuation income streams: Subsection 995-1(1) of the ITAA 1997 defines 'superannuation benefit' as having the meaning given by section 307-5. Section 307-5 of the ITAA 1997 states: 307-5(1) A superannuation benefit is a payment described in the table. Table 1: Types of superannuation benefits (table truncated) | Detailed Reasoning - Superannuation death benefit: 1 | Detailed Reasoning - superannuation fund payment: A payment to you from a superannuation fund because you are a fund member. A payment to you from a superannuation fund, after another person's death, because the other person was a fund member 307-5(2) A superannuation member benefit is a payment described in column 2 of the table. 307-5(4) A superannuation death benefit is a payment described in column 3 of the table. Section 307-70 of the ITAA 1997 defines 'superannuation income stream benefit' and 'superannuation income stream': 307-70(1) A superannuation income stream benefit is a superannuation benefit specified in the regulations that is paid from a superannuation income stream. 307-70(2) A superannuation income stream has the meaning given by the regulations. The Income Tax Assessment (1997 Act) Regulations 2021 (ITAR 2021) provides that all superannuation benefits are specified for the purposes of subsection 307-70(1) and also provides the definition of 'superannuation income stream' for the purposes of subsection 307-70(2), neither of which are discussed further in this reasons for decision. If a superannuation benefit does not satisfy the ITAR 2021's definitions of a superannuation income stream benefit, subsection 307-65(1) of the ITAA 1997 states: A superannuation lump sum is a superannuation benefit that is not a superannuation income stream benefit (see section 307-70). | Detailed Reasoning - Application - Taxation of benefits: The benefit paid from the Member's account as requested shortly before their death on Date A and received in their bank account on Date A is a superannuation lump sum. This is a straightforward application of subsection 307-65(1) ITAA 1997. The benefit paid from the Member's account as requested shortly before their death on Date A but received in their bank accountafter their death on Date C and Date D, is a superannuation death benefit. This is a straightforward application of subsection 307-65(4) ITAA 1997. | Detailed Reasoning - Legislative framework: The distinction between a superannuation member benefit and a superannuation death benefit is important because the tax treatment of the superannuation benefit varies according to its classification (as well as the age of the recipient and the components of the benefit). The tax treatment of superannuation member benefits is set out in Division 301 of the ITAA 1997. Broadly, section 301-10 states that if a member is 60 years or over when they receive a superannuation benefit, the benefit is non-assessable and non-exempt income. This applies whether the benefit is a superannuation lump sum or a superannuation income stream benefit. (The exception is if the taxable component of the benefit has an element untaxed in the fund: the untaxed element is assessable income and either section 301-95 or 301-100 will apply depending on whether the benefit is a lump sum or an income stream benefit.) The tax treatment of superannuation death benefits is set out in Division 302 of the ITAA 1997. Subdivision 302-B applies where the recipient is a death benefits dependant of the deceased, and Subdivision 302-C applies where the recipient is not a death benefits dependant of the deceased. As the Member did not have any death benefits dependants the reasons for decision will not discuss Subdivision 302-B further. Regarding a superannuation lump sum that a person receives because of the death of another person of whom they are not a death benefits dependant: • section 302-140 states that the tax-free component is non-assessable and non-exempt income; • subsection 302-145(1) states that the taxable component is assessable income. However, subsection 302-145(2) entitles the recipient to a tax offset to ensure the rate of tax on the element taxed in the fund does not exceed 15%, and subsection 302-145(3) entitles the recipient to a tax offset to ensure the rate of tax on the element untaxed in the fund does not exceed 30%. | Detailed Reasoning - Death benefit or member benefit: An amount that a member requested to be paid from their superannuation fund before their death, but was paid after their death, may be classified as a member benefit instead of a death benefit depending on the facts and circumstances of the payment. A trustee of a regulated superannuation fund can only pay superannuation benefits according to the fund's governing rules, including the fund's trust deed and relevant legislation. These governing rules set out when benefits can be paid and who they can be paid to, including after a member's death. A superannuation fund's governing rules must be read carefully to determine a member's benefit entitlements in the event of death. The trustee of the superannuation fund must assess whether the amount that the member requested to be paid is a member benefit or a death benefit based on the facts known at the time of the payment, including: • the terms of the member's request; • the terms of the trust deed and any other governing rules; • the fund trustee's knowledge at the time that the payment is made (including whether they are aware that the member has died); • the entity that the payment is being paid to; • the circumstances and timing of the payment; and • whether the payment is made because of and consistent with the member's request. | Detailed Reasoning - Lump sum benefit: At the time POAsubmitted the payment request, the Member had already satisfied a 'nil' condition of release (attaining the age of 65 years)and their superannuation benefits had been converted to unrestricted non-preserved benefits. They were thus entitled to: • voluntarily cash their benefits at any time (consistent with subregulation 6.20(1) of the SISR); • cash the whole or a part of their benefits (consistent with subregulation 6.20(2) of the SISR); and • cash the benefits as one or more lump sums (paragraph 6.20(3)(a) of the SISR) or one or more pensions (paragraph 6.20(3)(b) of the SISR). The SISR also permitted the release of superannuation benefits when the Member met the 'nil' condition of release of death. Subregulation 6.21(1) of the SISR states that a member's benefits in a regulated superannuation fund must be cashed as soon as practicable after the member dies. Considering the facts, at the time of the payment of the lump sum benefit(s): • The POA completed a cash transfer from the Trustee account to the Members personal account, as requested by the Member on Date A while the Member was still in hospital and able to give guidance of their directives. • The POA requested the sale of the investment units on Date A and payment from the investment units was received into the SMSF on Date B. • However, the transfer of the lump sum from the sale of the investment units from SMSF account to the Member account did not occur until the Date C and Date D. With no established reason for delay in transferring the funds as requested by the Member prior to their death. • Accordingly, it is established that the LPR and POA were aware the Member had passed away when this transaction took place, some months after the Members death. Accordingly, it is reasonable to treat the total superannuation lump sum benefit that was received into the Members personal account on Date A, as a superannuation member benefit. The tax treatment in Division 301 of the ITAA 1997 should apply to the benefit. It is also reasonable to treat the total superannuation lump sum benefit from the sale of the investment units, that was received on Date B but not paid to the Members personal account until Date C and Date D as a superannuation death benefit. The tax treatment in Division 302 of the ITAA 1997 should apply to the benefit.