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Is the taxpayer entitled to claim a deduction under subsection 8-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) if the amount paid on withdrawal from a superannuation fund is less than the amount they invested?

No. The taxpayer is not entitled to claim a deduction under subsection 8-1(1) of ITAA 1997 if the amount paid on withdrawal from a superannuation fund is less than the amount they invested.

The taxpayer purchased an allocated pension from a superannuation fund.

The taxpayer withdraws from the fund. The amount paid out is less than the amount the taxpayer invested.

Subsection 8-1(2) of the ITAA 1997 denies the taxpayer a deduction for this loss because it is capital in nature.

This means that only the eligible termination payment provisions apply.