Tuesday, November 19, 2019

Post death super trusts; a fine time in a time of need **

View Legal blog post Post death super trusts; a fine time in a time of need **

Previous posts have explored the approach to superannuation proceeds trusts (SPT) for infant beneficiaries by the Tax Office (see for examples - Superannuation and skirting the shoals of bankruptcy, Don't Stop Believin' - Tax Office & superannuation proceeds trusts and Just Can't Get Enough tax wins).

As explained in previous posts, the factual matrix for where SPTs are relevant are generally tragic - infant children who lose a parent who had not implemented a competent estate plan that was fully funded and incorporated testamentary trusts.

A regularly posed question in relation to establishing a SPT however is whether the payment of superannuation death benefits to the trust is in fact permitted under the relevant legislation.

In this regard, under section 307-15(2) of the Tax Act a payment can be made 'for the benefit' of the intended beneficiary, including to another person or entity.

Where a death benefit payment is made to the trustee of an SPT, this can satisfy the requirements in section 307 where, for example:
  1. the only beneficiaries of the SPT are infant children of the deceased;
  2. those children have an absolute beneficial entitlement to any amounts held in the SPT;
  3. the trustee of the SPT cannot amend the trust deed to vary or defeat the beneficial interest of any child. 

In this type of situation then, in accordance with section 302-60 of the Tax Act, the death benefits payment made from a superannuation fund to the trustee of the SPT is not assessable income.

The above conclusions are confirmed in Tax Office Private Ruling Authorisation Number 1013007176699. As usual if you would like a copy of the Private Ruling please contact me.

** For the trainspotters, the title of today's post is riffed from New Order's song 'Fine Time'.