Private ruling: Income - other - superannuation lump sum
Published: September 2012
Ruling period: Year ending 30 June 2013
Date scheme commenced: 01 July 2012

Ruling: Q1: Are you required to include all of your superannuation lump sum as assessable income? | A1: No. | Q2: Are you only required to include the taxable component of your superannuation lump sum as assessable income? | A2: Yes.

Relevant facts and circumstances: You received a lump sum from your superannuation fund on the grounds of total and permanent disability. Your payment was made up of a tax-free component and a taxable component (taxed element). You were born after 30 June 1964.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 301-30 | Income Tax Assessment Act 1997 subsection 301-35(1) | Income Tax Assessment Act 1997 subsection 301-35(2) | Superannuation Industry (Supervision) Regulations 1994 Clause 6.01

Reasons for decision: Summary: A superannuation lump sum will generally comprise of a tax-free component and a taxable component. | Detailed Reasoning - Tax-free component: Section 301-30 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the tax-free component is the part of a benefit that is not included in your assessable income and is not exempt income. As the name implies, the tax-free component is tax-free. Therefore the tax-free component of the superannuation lump sum will not be included in your assessable income. | Detailed Reasoning - Taxable component: The tax treatment of a taxable component depends on the age of the taxpayer at the time the payment is received. Generally a person must reach preservation age before he or she can access their superannuation. For persons born after 30 June 1964, their preservation age is 60 years of age. Subsection 301-35(1) of the ITAA 1997 states that where a taxpayer is under the preservation age when receiving a superannuation lump sum, the taxable component of the lump sum is assessable income. However, a tax-offset applies to ensure that the tax payable in respect of the element taxed in the fund will not exceed 20% plus medicare levy and, if applicable, medicare levy surcharge (subsection 301-35(2) of the ITAA 1997). In your case, you were granted an early release of your superannuation benefits on the grounds of total and permanent disability. Because you were born after 30 June 1964 your preservation age is 60 years of age. As such, you were below preservation age at the time you received the superannuation lump sum. Therefore, the taxable component of the superannuation lump sum will be included in your assessable income.

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