Private ruling: Deduction for future liability to pay death or disability benefits
Date of advice: 30 August 2018
Published: October 2018
Ruling period: Year ended 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Can the trustee of a Fund (the Fund) claim a deduction for future liability to pay death benefits under s 295-470 ITAA 1997? | A1: Yes

Relevant facts and circumstances: The Fund has maintained life insurance for the member of the Fund (the member) and has always claimed a deduction for the life insurance premium under section 295-465 of the ITAA 1997 The life insurance benefit as well as the member’s superannuation balance at the time of the member’s death will be paid as a superannuation death benefit in consequence of the termination of the member’s employment to his dependent spouse.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 295-460. | Income Tax Assessment Act 1997 Section 295-465. | Income Tax Assessment Act 1997 Subsection 295-465(1). | Income Tax Assessment Act 1997 Subsection 295-465(4). | Income Tax Assessment Act 1997 Section 295-470. ATO view documents | ATO ID 2015/17

Reasons for decision: Summary: A complying superannuation fund that provides benefits in relation to death, a terminal medical condition or disability, as detailed in section 295-460 of Income Tax Assessment Act 1997 (ITAA 1997), may claim a deduction under section 295-465 for a portion of the premiums that are paid for an insurance policy which covers these benefits. Alternatively, if the trustee of a fund is entitled to a deduction under section 295-465 of the ITAA 1997, and makes a choice under subsection 295-465(4) not to claim the deduction, the trustee can claim a deduction under section 295-470 for future liability to pay the benefits in relation to death, a terminal medical condition or disability (the benefits). Thus, in order to determine whether a fund can claim a deduction under section 295-470 of the ITAA 1997 consideration must first be given as to whether the fund is entitled to a deduction under section 295-465. In this case the Fund did pay premiums in relation to an insurance policy which covers the types of benefits stated in section 295-460 as the Fund had an insurance policy for those types of benefits and accordingly it can claim a deduction under subsection 295-465(1) of the ITAA 1997. Subsection 295-465(4) of the ITAA 1997 states: The trustee may choose not to deduct amounts under this section for an income year and to deduct instead (under section 295-470) amounts based on the fund’s future liability to pay the benefits. Section 295-470 of the ITAA 1997 states, amongst other matters, that a complying superannuation fund can deduct an amount for a future liability to pay benefits if: (a) the trustee of the fund makes a choice under subsection 295-465(4) of the ITAA 1997 and the choice applies to the income year; and (b) the trustee pays benefits referred to in section 295-460 of the ITAA 1997. Therefore the Fund can satisfy subsection 295-465(4) of the ITAA 1997 if it makes the relevant choice and it follows that the Fund can claim a deduction for future liability to pay benefits under section 295-470.