Sent: 13-04-2010 08:54:09
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Tax on Super Fund Death Benefits
Last Friday the ATO announced that it would be withdrawing a large number of Interpretative Decisions and
There are several reasons with these withdrawals. For example:
- The ATO's view has altered
- The law has changed and made an Interpretative Decision irrelevant
- Some Interpretative Decisions simply re-state what the law says and therefore delivers no interpretation of the law
At the same time the ATO release some new IDs.
Once released on Friday (2010/76) involves the taxation of death benefits and the possibility of these benefits containing an untaxed element of the Taxable Component. As might be obvious the untaxed element has a higher tax rate that a taxed element of the Taxable Component when the benefit is paid to a non-dependant.
If the insurance costs are claimed as a tax deduction then a formula works out what the untaxed element is. Effectively this formula taxes the future service element of the Taxable Component at a higher rate.
Someone asked the ATO if this formula applies if a super fund elects not to claim the cost of life insurance in the year death insurance proceeds are received by a super fund. The question was asked for the cost of the insurance and the future service element deduction.
Unsurprisingly the ATO says that it does because a specific provision says that the untaxed element formula will apply if the cost of insurance or future service element deduction has ever been claimed as a tax deduction. This will also apply to the old pre-Better Super laws.
My suggestion to you is to be careful with this area of the law.
No doubt many of you are familiar with some of the recent testimony before US Congressional hearings about the Global Financial Crisis. One US journalist, Peggy Noonan, summarises events from last week very well in the Wall Street Journal. You can read her article here http://www.atcbiz.com.au/r.php?r=fd0frzf
Finally please consider purchasing a copy of my book. You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
Two options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
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