Private ruling: Superannuation death benefits
Date of advice: 1 July 2016
Published: August 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Is the superannuation death benefit received by the Estate, from the Fund, not assessable, not exempt income? | A1: Yes

Relevant facts and circumstances: The Deceased passed away without a will. At the time of death, the Deceased was not married nor did they have any children. The Beneficiary commenced residing with the Deceased from around 200X-0X and continued to do so until the Deceased's death. The Beneficiary and the Deceased were engaged in a domestic partnership for a continuous period of over two years prior to the Deceased's death. In the relevant income year, the Fund made a death benefit payment to the Estate of the Deceased (the Estate) which contained a taxable component - taxed element, a taxable component - untaxed element, and a tax-free component. The superannuation death benefit received by the Estate will be distributed to the Beneficiary and to no other party. It is anticipated that the Estate will pay the superannuation death benefit to the Beneficiary and to no other party. There are no other disputes or claims to the Estate.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 302-10 | Income Tax Assessment Act 1997 subsection 302-10(2) | Income Tax Assessment Act 1997 section 302-60

Reasons for decision: Summary: The superannuation death benefit paid out to the Estate is not assessable income and is not exempt income. | Detailed Reasoning - Death benefits paid to trustee of deceased estate: Section 302-10 of the ITAA 1997 applies to the trustee of a deceased estate who receives a superannuation death benefit. Under subsection 302-10(2) of the ITAA 1997, to the extent that 1 or more beneficiaries of the estate who were *death benefits dependants of the deceased have benefited, or may be expected to benefit, from the *superannuation benefit: (a) the benefit is treated as if it had been paid to you as a person who was a death benefits dependant of the deceased; and (b) the benefit is taken to be income to which no beneficiary is presently entitled. *To find definitions of asterisked terms, see the Dictionary, starting at 995-1 Under section 302-60 of the ITAA 1997, a superannuation lump sum received because of the death of a person of whom you are a death benefits dependent, is not assessable not exempt income. In other words, if a death benefit is received by the trustee of a deceased estate, it will be tax free to the extent that a death benefits dependent of the deceased is expected to benefit from the payment. | Detailed Reasoning - Death benefits dependant: Section 302-195 of the ITAA 1997 defines death benefits dependant, of a person who has died, as: (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. *To find definitions of asterisked terms, see the Dictionary, starting at 995-1 Under section 995-1 of the ITAA 1997, a spouse includes (b) another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple. The Beneficiary commenced residing with the Deceased on around 200X-0X and continued to do so until the Deceased's death. Furthermore, according to the facts provided in the private ruling application, the Beneficiary and the Deceased were engaged in a domestic partnership to the time of the Deceased's death. Hence, the Beneficiary is considered a spouse of the Deceased, and is a death benefits dependent, under section 302-195 of the ITAA 1997. Since a death benefits dependent is expected to benefit from the entirety of the superannuation death benefit received by the Estate, the entirety of the superannuation death benefit received by the Estate is treated as if it was paid, to a, death benefits dependent. In other words, the entirety of the superannuation death benefit paid out to the Estate is not assessable income and is not exempt income.