Private ruling: Lump sum superannuation benefit
Published: July 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is a lump sum superannuation benefit received from a superannuation plan tax-free in the hands of the taxpayer? | A1: Yes.

Relevant facts and circumstances: You are over 60 years of age. You were a former employee of an entity (Entity 1) and were made redundant. You were a former member of a superannuation plan (the Fund). The Fund was involved in proceedings with the Supreme Court concerning a dispute over certain benefits within the plan. Namely, death benefits in retirement and the trust deed's definition of Final Average Pay which is used in the calculation of retirement benefits. The proceedings were finalised when a compromised agreement was approved by the Supreme Court. During the 2011-12 income year you received a cash benefit payable from the Superannuation Plan for the amount of $X. This amount was entirely a taxed element of a taxable component. The Fund advised that as you are over 60 years of age the tax rate that applies to the abovementioned payment amount is zero percent.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 301-20(1) | Income Tax Assessment Act 1997 Subsection 307-125(2) | Income Tax Assessment Act 1997 Section 307-215

Reasons for decision: Summary: The superannuation lump sum benefit you received comprised wholly of a taxable component. As this taxable component was entirely an element taxed in the fund and you were over 60 years of age when it was paid, the entire amount is tax-free. | Detailed Reasoning - Superannuation lump sum payments: Lump sum payments made to you from a superannuation fund are called superannuation lump sum benefits, and these benefits will generally comprise: · a tax-free component; and · a taxable component which may include: · an element taxed in the fund; and/or · an element untaxed in the fund. | Detailed Reasoning - Taxable component: The taxable component of a superannuation lump sum can consist of an element taxed in the fund and/or an element untaxed in the fund. In your case, the taxable component of the superannuation benefit was wholly comprised of an element taxed in the fund. The tax treatment of the taxed element of a taxable component depends on the age of the taxpayer. As your lump sum superannuation benefit comprised wholly of an element taxed in the fund and you were over 60 years of age when it was paid, the tax rate that applies to the payment is zero percent. Therefore, the payment of $X is tax-free and will not be included in your assessable income in the 2011-12 income year.

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