Superannuation Contributions Surcharge - apportioning the surcharge liability of a deceased member of a Constitutionally Protected Fund to the member's beneficiaries

Can the surcharge debt be apportioned by the trustee of the super fund amongst two or more beneficiaries of a deceased member?

No, a surcharge debt can not be apportioned by the trustee of the super fund amongst two or more beneficiaries of a deceased member. Any surcharge liability payable would be assessed to the deceased member's estate. The trustee/executor of the estate would then distribute the remaining superannuation proceeds in accordance with the deceased's will.

A member of a Constitutionally Protected Fund (CPF) dies during the current year of income. He has surchargeable contributions reported by his CPF for the current year as well as a previous year of income.

There is more than one spouse (ie one legal spouse and one defacto) to whom the superannuation fund will pay benefits on the death of the member.

Section 11 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (SCT(CPF)A&C Act) provides that it is the member who is liable to pay the surcharge.

The Commissioner will assess a member for any surcharge liability for all financial years prior to the financial year in which the member dies. The assessed liability will be a debt of the member and the Commissioner will seek to recover from the member or the member's estate where the member has died without paying the surcharge liability.

The cap would also apply. If a member dies 'in office', the fund would report in line with subsection 15(6) of the SCT(CPF)A&C Act. The Commissioner would take this into account when calculating the amount required to be paid. The notice under subsection 15(7) of the SCT(CPF)A&C Act would be sent to the trustee/executor of the estate of the member.

There will be no liability on a surviving beneficiary (or beneficiaries) as there is no provision in the law to shift the surcharge liability to a beneficiary. However, there may be issues if the member's estate is distributed without taking account of the surcharge liability - in cases such as this, the Commissioner may have a claim against the trustee/executor of the deceased estate.