Private ruling: Superannuation benefits
Date of advice: 2 November 2020
Published: January 2021
Ruling period: 30 June 2020
Date scheme commenced: 1 July 2018

Ruling: Q1: Was the payment made by the Deceased taxpayer's fund a superannuation death benefit for the purposes of Subdivision 302-A of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No | Q2: Was the payment made by the Deceased's Fund a superannuation benefit defined in subsection 307-5(2) of the ITAA 1997? | A2: Yes

Relevant facts and circumstances: On DDMMYY, the Deceased made a superannuation lump sum withdrawal request in writing to the Trustee of the Fund to release a mixture of cash and securities on the basis that at the time of the request, the Deceased had a terminal medical condition and thus satisfied a condition of release under the Superannuation Industry (Supervision) Regulations 1994 (SISR). On DDMMYY, the Trustee acknowledged and agreed to the Deceased's request to withdraw a lump sum benefit in the form of cash and an in-specie distribution of securities. On DDMMYY a meeting of the sole director of the Trustee was held agreeing to: i. The Deceased withdraw the majority of the assets remaining in the Fund as a lump sum benefit, less an amount to be used for accounting and tax expenses; ii. The Deceased's child, be appointed as a director of the Fund's corporate trustee and that they accepted such an appointment; iii. The Deceased be authorised to sell the shares within the Fund's trading account; iv. Once the shares are sold the Deceased resign as director of the Fund's corporate trustee; v. The child to be authorised, as the sole director to attend to and transfer such amount determined by them to such account as nominated by them in the name of the Deceased. On D1MMYY sell orders were placed for the remaining investments, a majority of the sales were processed on D1MMYY. A deterioration of the Deceased's health resulted in them passing on D2MMYY. At the date of death, the Deceased was 64 years of age. On D3MMYY. The majority of the proceeds of the sales of the investments were deposited into the Fund's bank account. The Trustee subsequently transferred an amount from the Fund's bank account to the Deceased's personal bank account. An amount was left in the Fund's bank account, in accordance with the Deceased's lump sum withdrawal request.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 302-A | Income Tax Assessment Act 1997 Section 307-5. | Income Tax Assessment Act 1997 Subsection 307-5(1) | Income Tax Assessment Act 1997 Section 307-15 Summary | The payment from the Fund to the taxpayer was made because they were a fund member. Accordingly, the payment is a superannuation member benefit. | Detailed reasoning | Subsection 995-1(1) of the ITAA 1997 states that a 'superannuation death benefit' has the meaning given by section 307-5 of the ITAA 1997. | Subsection 307-5(1) of the ITAA 1997 defines the term superannuation benefit as being a payment described in the table appearing in the subsection. Item 1 of the table relevantly defines a 'superannuation fund payment' and states: | Types of superannuation benefits | Item | Column 1 | Superannuation benefit type | Column 2 | Superannuation member benefit | Column 3 | Superannuation death benefit | 1 | 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. | Subsection 307-5(2) of the ITAA 1997 further clarifies that a payment described in column 2 of the table in subsection 307-5(1) is a superannuation member benefit | In this case, the payment was made by the Fund to the Deceased's nominated savings account as requested by the Deceased immediately prior to their death. The Fund trustee processed the request in accordance with SISR regulation 6.20 and regulation 6.22. | As such, the payment is a superannuation member benefit paid by the Fund to the Deceased. | Upon receipt by the Deceased, this payment loses its character of superannuation member benefit and simply becomes money which is part of the Deceased's estate to be distributed to the Deceased's beneficiaries in accordance with the Deceased's wishes. | Therefore, the payment made by the Fund to the Deceased's personal bank account is not a superannuation death benefit for the purposes of Subdivision 302-A of the ITAA 1997.