Private ruling: Exempt current pension income
Published: 27 October 2025
Ruling period: Year ended 30 June 2024 | Year ended 30 June 2025

Ruling: Q1:  | A1: 

Relevant facts and circumstances: We've made this private ruling based on the facts and circumstances set out below. If your facts and circumstances differ from those set out below, this private ruling has no effect, and you can't rely on it. The fact sheet has more information about relying on your private ruling. 1. The Superannuation Fund (the Fund) is a self-managed superannuation fund. 2. The Fund had one member (the Deceased). 3. The Fund has a corporate trustee, and the Deceased was the sole director. 4. The Deceased's will (the Will) that was signed and dated XX XX 20XX appointed their spouse (the Spouse) and their adult child as the executors of the Will and estate. A clause in the Will referred to superannuation payable in consequence of death. 5. On XX XX 20XX the Deceased signed a 'Binding Nomination of Beneficiary Form' (BDBN) directing that 100% of the Fund's death benefits be paid to the Spouse. 6. The Deceased passed away on XX XX 20XX. 7. Prior to their death, the Deceased was in receipt of an account-based pension (non-reversionary). 8. On XX XX 20XX, the Supreme Court issued a grant of probate to the Deceased's adult child. 9. The Deceased's adult child was appointed as director of the corporate trustee on XX XX 20XX. For the purposes of this ruling, they will be referred to as the Director. 10. On XX XX 20XX, you applied for a private ruling to confirm whether the Fund could claim ECPI in respect of the deceased member's pension assets for the period following their death until the benefits were paid to their dependant spouse 'as soon as practicable'. At the time of the application, the remaining death benefits had not yet been paid. 11. We were advised that the benefits comprised both cash and a property, with the Spouse identified as the sole beneficiary. 12. The applicant provided a timeline to explain the delays in paying the death benefits. The Director was overseas at the time of death, probate was delayed, legal advice was sought in respect of clauses in the Will and the BDBN, and difficulties were encountered in relation to the transfer of property. 13. A land tax ruling was received, and the property transferred in XX 20XX. 14. The Fund claimed exempt current pension income under section 295-385 of the ITAA 1997 for the 20XX-XX and 20XX-XX income years.

Relevant legislative provisions: ITAA 1997 295-385 | ITAA 1997 295-390 | ITAA 1995 307-70 | ITAR 2021 | SISR 1994 6.21 | We followed these ATO view documents | Taxation Ruling TR 2013/5 - Income Tax: when a superannuation income stream commences and ceases

Reasons for decision: Detailed Reasoning - Superannuation Income Stream Benefit: 1. Section 295-385 of the ITAA 1997 provides an income tax exemption for the income of a complying superannuation fund that is supporting current liabilities of superannuation income stream benefits payable by the fund at a particular time. 2. A superannuation income stream ceases as soon as a member in receipt of the superannuation income stream dies, unless a dependant beneficiary of the deceased member is automatically entitled to receive an income stream on the death of the member. 3. Subregulation 307-70.02(1) of the Income Tax Assessment (1997 Act) Regulations 2021 (ITAR 2021) states: For the purposes of subsection 307-70(2) of the Act, a superannuation income stream is: ..... d) for the purposes of sections 295-385 ...of the Act - one or more rights (whether contingent or not), to the extent that they are covered by subsection (3). 4. Subregulation 307-70.02(2) of the ITAR 2021 provides: Subsection (3) applies if: a) immediately before the death of a person (the deceased ), a superannuation interest was supporting a superannuation income stream payable to the deceased; and b) the superannuation income stream did not automatically revert to another person on the death of the deceased; and c) one or more other persons each have a right (whether contingent or not) to be paid an amount that will be a superannuation benefit from the superannuation interest; and d) each such right arises on the death of the deceased, and ceases to exist immediately after the payment of the amount mentioned in paragraph (c). 5. Subregulation 307-70.02(3) of the ITAR 2021 states: For the purposes of paragraph (1)(d), this subsection covers each such right, to the extent that the value of the superannuation interest has not increased (other than through investment earnings) on or after the deceased' s death. 6. Paragraph 140 of Taxation Ruling TR 2013/5 - Income Tax: when a superannuation income stream commences and ceases , states: 140. The meanings of terms in the ITAR (1997 Act) 2021 are not intended to change from those equivalent terms in the ITAR 1997. The provisions are also generally contained in similarly numbered provisions to the ITAR 1997, for instance former regulation 307-70.01 in the ITAR 1997 is now reflected in section 307-70.01 in the ITAR (1997 Act) 2021. 7. Therefore, the definition of a superannuation income stream allows the ECPI on assets supporting a pension to continue following the death of a member. This ensures that, where a fund member was receiving a superannuation income stream immediately before their death, the fund will continue to be entitled to the ECPI for the period from the member's death until their benefits are cashed out to a beneficiary. This is on the condition that no other amounts (apart from investment earnings) have been added to the superannuation interest following the member's death. 8. However, the payment will only be a superannuation income stream benefit for the period between the member's death and the payment of the superannuation death benefit, where it is paid 'as soon as practicable' in accordance with Regulation 6.21 of the Superannuation Industry (Supervision) Regulations 1994 (SISR) . 9. There is no legislative definition of the term 'as soon as practicable'. Determinations as to whether the requirement is met are to be made on a case-by-case basis. 10. The Oxford English Dictionary defines the term 'practicable' as being able to be done or put in practice successfully. 11. The Cambridge English Dictionary explains the term 'practicable' as capable of being able to be done or put into action. 12. In this case, the timeline provided demonstrates that the delays were attributable to legitimate and documented administrative, legal, and procedural factors - including delays in legal advice and property transfer processes. 13. These delays were outside the control of the Director however they were actively managed throughout the period from the member's death until the benefits were cashed out to the beneficiary. Importantly, the documentation consistently shows that the Director and associated parties were taking steps to resolve the matter and progress the payment of death benefits at every stage. | Detailed Reasoning - Conclusion: 14. Based the evidence provided, we are satisfied that the payment of death benefits was made as soon as practicable. Accordingly, the earnings of the Fund during the period between the member's death and the payment of the lump sum continue to be exempt current pension income (ECPI) for the purposes of the ITAA 1997.

Subject: Exempt current pension income: Question: Will the earnings of the Fund continue to be exempt current pension income (ECPI) for the purposes of section 295-385 of the Income Tax Assessment Act 1997 (ITAA) for the 20XX-XX and 20XX-XX income years?