Private ruling: Death benefits
Date of advice: 5 November 2019
Published: January 2020
Ruling period: 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Was the payment made by the deceased taxpayer's (the Deceased) 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(1) of the ITAA 1997? | A2: Yes

Relevant facts and circumstances: The Deceased was born during the 19XX income year. During the 2018-19 income year, the Deceased completed and signed an 'Apply for Payment' form (the Application), on the basis that they were over preservation age and under 64, had ceased gainful employment, and did not plan to work more than 10 hours per week again. The Application was posted to Australian super fund via express post on the next business day. A few days later, the Deceased passed away. The Application was processed by the Deceased's Australian super fund shortly after, and a confirmation letter generated. According to the final calculation, the payout figure was a certain amount (Non-preserved unrestricted benefit). The funds were deposited into the Deceased's personal bank account shortly thereafter as a lump sum and not as a death benefit lump sum.

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.

Reasons for decision: Summary: The lump sum 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. The payment is money which is part of the Deceased's estate to be distributed to the Deceased's beneficiaries in accordance with their wishes. | Detailed Reasoning - Superannuation death benefit: 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. Superannuation benefits are defined in section 307-5 of the ITAA 1997. In accordance with Item 1 of the table in subsection 307-5(1) of the ITAA 1997 a superannuation member benefit is a payment to you from a superannuation fund because you are a fund member; Superannuation death benefit is defined in subsection 307-5(4) of the ITAA 1997 as being a payment described in Column 3 of the table in subsection 307-5(1). A superannuation death benefit is described in Column 3 of Item 1 of the table in subsection 307-5(1) as: ... A payment to you from a superannuation fund, after another person's death, because the other person was a fund member. Section 307-15 of the ITAA 1997 applies for the purposes of determining whether a payment is made to you, or received by you, and states: A payment is treated as being made to you, or received by you, if it is made: a) for your benefit; or b) to another person or to an entity at your direction or request. 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 death. 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 their 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.