Assessability of Orphan Pension

Is the orphan pension the taxpayer receives from a deceased parent's superannuation fund assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. The orphan pension the taxpayer receives from a deceased parent's superannuation fund is assessable under section 27H of the ITAA 1936.

The taxpayer receives fortnightly payments of an orphan pension from a superannuation fund as a result of the death of a parent.

The superannuation fund is administered by ComSuper.

The taxpayer is a full time tertiary student. The orphan pension will continue to be paid until the taxpayer turns 25 years of age, or completes full time education.

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) includes in assessable income ordinary income derived directly or indirectly from all sources during the income year.

Periodical payments from superannuation funds are generally regarded as income according to ordinary concepts, and are therefore assessable as ordinary income under section 6-5 of the ITAA 1997.

However, section 10-5 of the ITAA 1997 lists a number of provisions which vary or replace the rules that would otherwise apply for certain kinds of ordinary income. One such provision is section 27H of the ITAA 1936. Under this provision, annuities including superannuation pensions (reduced by any deductible amount in respect of their purchase price) are specifically included in assessable income.

Accordingly, the taxpayer's orphan pension received from the superannuation fund, less any deductible amount in respect of the purchase price, is assessable under section 27H of the ITAA 1936.