Private ruling: Dependency
Date of advice: 16 October 2017
Published: March 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Is the amount of the superannuation death benefit to be distributed to a beneficiary under the Will not assessable income and not exempt income? | A1: Yes

Relevant facts and circumstances: The Deceased passed away in the 2015-16 income year. The beneficiary is a de-facto spouse of the Deceased at the time of death. The Deceased’s estate received a superannuation lump sum benefit from an Australian superannuation fund (the Fund). A PAYG payment summary – superannuation lump sum (the Summary) for the 2016-17 income year from the Fund shows a death benefit was made to the Deceased’s estate in the 2016-17 income year. The Summary further shows the gross death benefit was comprised of a taxable component - taxed element, a taxable component - untaxed element and a tax free component. The Deceased’s Will sets out how the Deceased’s estate is to be distributed. A draft distribution statement sets out the amount each beneficiary is to receive from the Deceased’s estate.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 302 | Income Tax Assessment Act 1997 Section 302-10 | Income Tax Assessment Act 1997 Subsection 995-1(1).

Reasons for decision: Summary: The beneficiary is a death benefits dependant of the Deceased. Therefore, the superannuation death benefit made to the beneficiary, in accordance with the Will, is not assessable income and is not exempt income. | Detailed Reasoning - Detailed reasoning: Under section 302-10 of the Income Tax Assessment Act 1997 (ITAA 1997), the taxation arrangements for superannuation death benefits paid to a trustee of a deceased estate are determined in accordance with the taxation arrangements that would otherwise apply to the person or persons otherwise intended to benefit from the estate. This means that where a dependant of the deceased is expected to receive part or all of a superannuation death benefit, it will be subject to tax as if it were paid to a dependant of the deceased, and the benefit is taken to be income to which no beneficiary is presently entitled. Where a person that is not a dependant is expected to receive part or all of a superannuation death benefit, it will be subject to tax as if it were paid to a non-dependant of the deceased to that extent, and the benefit is taken to be income to which no beneficiary is presently entitled. Where a person receives a superannuation death benefit and that person was a dependant of the deceased, it is not assessable income and is not exempt income. Subsection 995-1(1) of the ITAA 1997 states that the term 'death benefits dependant' has the meaning given by section 302-195 of the ITAA 1997. Section 302-195 of the ITAA 1997 defines a death benefits dependant as follows: A death benefits dependant , of a person who has died, is: (a) the deceased person's spouse or former spouse; or (b) the deceased person's child, aged less than 18; or (c) any other person with whom the deceased person had an interdependency relationship under section 302-200 just before he or she died; or (d) any other person who was a dependant of the deceased person just before he or she died. In this case, the beneficiary was the de-facto spouse of the Deceased at the time of death. Therefore, the de-facto spouse is a death benefits dependant of the Deceased. Accordingly, the superannuation death benefit made to the beneficiary, in accordance with the Will is not assessable income and is not exempt income.

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