ATO, Death benefits

ATO confirms member benefit stance

ATO private binding ruling death benefit

The ATO has demonstrated it will view a trustee’s awareness of the death of a super fund member as important when deciding how to define benefit payments around the time of their passing.

The ATO has confirmed its treatment of superannuation benefits requested before death but paid after that event as member or death benefits will depend on the trustee’s knowledge of the member’s passing, confirming the stance it took in revised guidance issued earlier this year.

The regulator confirmed its position in a private binding ruling released yesterday, in which it decided the full commutation of a member’s pension-phase account requested shortly before their death but received one day after their passing was a member benefit.

The ruling, given on 30 September and made public on 6 November, related to a super fund member older than 65 who had met a condition of release with a nil cashing restriction with their superannuation in pension phase.

Having lost capacity, a state government authority had appointed two family members as administrators of the member’s estate who decided to fully commute the member’s account-based pension to the member’s personal bank account. After receiving a legitimate commutation request, the fund paid the member’s pension-phase account into their personal bank account a day after the member died.

In making its decision to treat the payment as a member benefit, the ATO noted the trustee of the fund had to be aware of key facts at the time of the benefit payment, including the terms of the trust deed and any other governing rules, as well as if they were aware the member had died.

“We assume that the benefits were paid in accordance with the super fund’s trust deed and other governing rules,” the ATO stated, adding “the super fund was unaware of the member’s death before it paid the lump sum benefits”.

“The lump sum was paid into the member’s personal bank account as the trustee was unaware of the member’s death and [because] payment of the lump sum was paid one day after the event, it can be said that the trustee made the payments with the expectation that the member would be alive to receive it.

“The timeframe between the trustee becoming aware of the member’s death shortly after it occurred and the payments being made one day after the member’s death indicates the payments were made because of and consistent with the member’s request.

“Considering the facts, at the time of the payment of the lump sum benefit … it is reasonable to treat the total superannuation lump sum benefit as a superannuation member benefit.”

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