ATO Interpretative Decision
ATO ID 2015/3 (Withdrawn)
Superannuation: death benefits: a member's benefits must be 'cashed' upon death
||This ATO ID has been withdrawn and replaced by ATO ID 2015/23 to make it clear that the factual scenario involves the payment of a deceased member's benefits in the form of a lump sum, and to incorporate reasoning from ATO ID 2015/2, which has been withdrawn.
||This document has changed over time. View its history.
Status of this decision: Decision Withdrawn 7 August 2015.
|CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.|
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Where the benefits of a deceased member of a self-managed superannuation fund are to be paid as a death benefit to the taxpayer, does regulation 6.21 of the Superannuation Industry (Supervision) Regulations 1994 (SISR) allow the benefit to be transferred to the taxpayer's member account by way of journal entries in the books of the fund?
No. The death benefit must actually be paid to the taxpayer by transfer of ownership of the deceased member's assets to the taxpayer.
The taxpayer and the taxpayer's spouse are both members of the same self-managed superannuation fund.
The taxpayer's spouse dies, and the spouse's benefits are to be paid out as a death benefit to the taxpayer. The benefits of the deceased member consist of publicly listed shares and cash.
The taxpayer wishes to remain in the fund and to re-contribute the death benefit directly to their member account. In order to avoid transaction fees, the taxpayer wishes to know whether it is possible to transfer the funds from the deceased member's account to the taxpayer's own account by way of journal entry.
Reasons for Decision
Subregulation 6.21(1) of SISR provides that a member's benefits in a regulated superannuation fund (other than the member's post-65 employer-financed benefits) must be 'cashed as soon as practicable' after the death of the member.
Subregulation 6.21(2) of SISR goes on to prescribe the forms in which the benefits may be cashed for the purposes of regulation 6.21 of SISR. In this case, the benefits may be cashed in any combination of one or more lump sums, pensions and purchased annuities. For the purposes of regulation 6.21 of SISR, but excluding Schedule 1, the definition of 'lump sum' includes an asset: subregulation 6.01(2) of SISR.
The term 'cashed' is not defined in the Superannuation Industry (Supervision) Act 1993 or in the SISR. However, the use of the term within the SISR appears to suggest that in order to be 'cashed', the benefits need to be paid out of the superannuation system. SMSFD 2011/1 states that 'for the purposes of Division 6.3, 'cashing' involves a member's benefits in a fund' being 'paid'. This indicates that cashing involves an SMSF making a payment which reduces the member's benefits in the fund'. Consequently, transferring the shares and cash to the taxpayer's account from the deceased member's account via a journal entry would not amount to 'cashing' the benefits, and therefore, regulation 6.21 of SISR would not be satisfied.
Note: Journal entries are also insufficient to establish that a superannuation fund has paid a superannuation death benefit for income tax purposes (see ATO ID 2015/2)
Date of decision: 23 January 2015
Superannuation Industry (Supervision) Regulations 1994
Related Public Rulings (including Determinations)
Self-managed Superannuation Funds Determination SMSFD 2011/1
Related ATO Interpretative Decisions
ATO ID 2015/2
Death benefits-superannuation benefits
Self-managed superannuation funds
Siebel/TDMS Reference Number: 1-65B8N9V; 1-6TLFE08
Business Line: Superannuation
Date of publication: 30 January 2015