Private ruling: Superannuation lump sum income
Published: August 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Does the Commissioner have any discretion to alter the tax treatment of your superannuation lump sum income? | A1: No Year ended 30 June 2012

Relevant facts and circumstances: Due to financial difficulties, you withdrew your superannuation prior to turning 60 years of age. As a result, the superannuation lump sum was included in your taxable income, which decreased your entitlement to the low income offset and created a liability for the temporary flood levy. You wish the Commissioner to use his discretion to treat the superannuation lump sum as if you had received it after turning 60 years of age.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 302-10 | Income Tax Assessment Act 1936 Section 159N.

Reasons for decision: Summary: Subdivision 301-B of the Income Tax Assessment Act 1997 (ITAA 1997) outlines the assessability rules of superannuation lump sum payments. Section 301-20 of the ITAA 1997 states that if a taxpayer is under 60 years but have reached their preservation age when they receive the lump sum, the taxable component of the lump sum is assessable income. Section 301-20 further states that a taxpayer is entitled to a tax offset that ensures the rate of tax payable on this income is zero, provided the amount is below the taxpayer's low rate threshold. In your case, you are aged below 60 but have reached your preservation age. You have therefore correctly included the superannuation lump sum in your taxable income, and have received a tax offset to ensure that a tax rate of zero has been applied to the lump sum. Section 159N of the Income Tax Assessment Act 1936 allows a tax offset for certain low income resident taxpayers. The maximum tax offset is $1,500, and reduces by 4c for every dollar that a taxpayer's taxable income is above $30.000. In your case, your taxable income for the 2011-12 financial year was in excess of $30,000 and the amount of low income tax offset you have received on your notice of assessment was correctly calculated. Although we appreciate you have been disadvantaged by your circumstances, the Commissioner does not have any discretion to alter the taxation arrangements for superannuation lump sum income.