Issue
Does an ETP rebate apply to an ETP paid from a superannuation fund to a deceased estate where there are no beneficiaries of the estate that are dependant's of the deceased?
Decision
Yes. A maximum rate of 15% applies to the taxed element of post-June 1983 component of a death benefit ETP. A maximum tax rate of 30% applies to the untaxed element of the post-June 1983 component of a death benefit ETP.
Facts
ETP amount was paid to the deceased taxpayer's estate by a complying superannuation fund.
No dependant dependants of the deceased are beneficiaries of the estate.
The ETP consists of pre July 1983 component and a post-June 1983 component - taxed element.
Reasons for Decision
Subparagraph 27A(3)(b) of the ITAA 1936 states that a lump sum payment made after the death of the taxpayer is an ETP in the hands of the trustee of the estate of the deceased taxpayer.
The ETP is included in the assessable income of that year of income of the trust estate under subsection 101A(3) of the ITAA 1936, and is deemed to be income to which no beneficiary is presently entitled.
The ETP will be assessable as an ordinary ETP and broken into its ordinary components based on the deceased taxpayer's eligible service period (ESP). ESP is defined in subsection 27A(1) of the ITAA 1936.
The ETP is a benefit ETP under section 27AAA of the ITAA 1936. The dependant's concession under subsection 27AAA(3) does not apply because none of the beneficiaries of the estate are dependants of the deceased as defined in subsection 27A(1) of the ITAA 1936.
As per section 27B(1A) of the ITAA 1936, if a death benefit ETP is made in relation to a taxpayer in relation to a year of income, the taxpayer's assessable income of the year of income includes: (a) the taxed element of the retained amount of the post-June 1983 component; and (b) the untaxed element of the retained amount of the post-June 1983 component.
Subsection 27C(1) of the ITAA 1936 includes in a taxpayer's assessable income 5% of the retained amount of the pre-July 1983 component of the ETP.
A rebate of tax effectively limits the rate of tax to the maximum rates set out in section 159SA of the ITAA 1936.
Under section 159SA of the ITAA 1936 the taxed element of the post-June 1983 component of a death benefit ETP has a maximum rate of tax of 15%. The untaxed element of the post-June 1983 component of a death benefit ETP has a maximum rate of tax of 30%.