Issue
Is an amount assessable to the taxpayer as an 'eligible termination payment' (ETP), as defined in subsection 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936), where it is paid from the taxpayer's superannuation fund directly to the taxpayer's former spouse under a court order?
Decision
Yes, the payment is assessable as an ETP to the taxpayer under the provisions of the ITAA 1936.
Facts
The taxpayer is over 55 years of age and is a member of a superannuation fund as defined in subsection 27A(1) of the ITAA 1936.
The superannuation fund pays an amount directly to the taxpayer's former spouse pursuant to the terms of a court order that relates to a property settlement between the taxpayer and the taxpayer's spouse.
In order to allow the superannuation fund to make the payment directly to the former spouse, the taxpayer must supply a copy of the court order and sign an authority.
Reasons for Decision
An eligible termination payment (ETP) is defined by subsection 27A(1) of the ITAA 1936. Paragraph (b) of the definition states that an ETP includes 'any payment made from a superannuation fund in respect of the taxpayer by reason that the taxpayer is or was a member of the fund...'. Accordingly, the payment need not actually be made to the member, provided it is made 'in respect of' the member.
Subparagraph 27A(3)(a)(ii) of the ITAA 1936 operates to expand the meaning of a payment made 'in respect of the taxpayer' to include a payment made, whether voluntarily, under an agreement or because of a legal obligation, for the benefit of a dependant of the taxpayer. Subsection 27A(1) of the ITAA 1936 provides that a dependant includes another person who was the spouse of the taxpayer.
Alternatively, subparagraph 27A(3)(a)(iii) of the ITAA 1936 operates to expand the meaning of 'in respect of the taxpayer' to include a payment made to another person at the direction or request of the taxpayer.
The payment from the superannuation fund constitutes an ETP of the taxpayer under subsection 27A(1) of the ITAA 1936, as it was made to the taxpayer's former spouse at the direction of the authority signed by the taxpayer. Consequently, the retained amounts of the ETP are included in the assessable income of the taxpayer under sections 27B and 27C of the ITAA 1936.