An anti-detriment death benefit payment is the term used for an increased lump sum superannuation death benefit paid by a superannuation fund to an eligible beneficiary upon the death of a member of the fund. The payment is meant to represent a refund of contributions tax paid by the member during their life.

In limited cases it may be possible to track through contribution records and identify the amount of contributions tax that a member has paid. This can usually only occur where the member has maintained one superannuation fund during their life. However, during a person’s life they may have changed superannuation funds a number of times and it will not be possible for the superannuation fund paying the lump-sum superannuation death benefit to determine the amount of contributions tax paid by the member during their life. Therefore, in practice, the amount of the anti-detriment death benefit payment is usually determined by a formula contained within the superannuation fund’s trust deed.

A superannuation fund can make an anti-detriment death benefit payment to eligible beneficiaries of a deceased member. The trustees of the superannuation fund can claim a deduction for a payment of an increased amount of a lump-sum superannuation death benefit (the anti‑detriment death benefit) under subsection 295-485(2) of the Income Tax Assessment Act (ITAA) 1997.

For the trustees of a complying superannuation fund to claim a deduction under subsection 295-485(2), the following conditions must be satisfied:

• the superannuation fund must have been
  
  
• continuously complying from the later of 1 July 1988 or since inception of the fund
  
  
• a lump-sum superannuation death benefit must be paid
  
  
• the lump-sum superannuation death benefit is increased by an amount that the fund could have paid if no tax was payable on the taxable component of the superannuation fund, and
  
  
• at the time of death or payment, the amount is paid to an eligible beneficiary.

According to paragraph 295-485(1)(a) of the ITAA 1997, an eligible beneficiary, for the purposes of receiving an anti-detriment death benefit, is limited to a deceased’s:

• spouse (including de-facto spouse or same-sex partner), or
  
  
• former spouse, or
  
  
• child (including adult child), at the time of death or payment.
  

The proceeds paid under the anti-detriment death benefit provisions will be subject to tax under the rules that apply to lump-sum superannuation death benefits. Any anti-detriment death benefit will form part of the taxable component of a deceased member’s lump-sum superannuation death benefit and if paid to a non-dependant for tax purposes, (eg adult children who were not financially dependant on, or in an interdependency relationship with, the deceased) will be taxed at up to 16.5 per cent, including Medicare levy.

When considering estate planning strategies, such as a withdrawal and recontribution strategy, consideration should be given to any impact on the payment of an anti-detriment death benefit. A recontribution strategy is generally designed to provide an increased tax‑free component. As anti-detriment death benefits will not be payable on any tax-free component, a withdrawal and recontribution strategy may reduce any potential anti‑detriment death benefit payable to an eligible beneficiary.

Whether a trustee of a superannuation fund can take advantage of the anti-detriment death benefit provisions is determined by reference to the fund’s trust deed. A number of the larger public offer superannuation funds automatically increase the death benefits payable to eligible beneficiaries of deceased members by the amount of the anti-detriment death benefit. However, not all superannuation fund trust deeds contain provisions to use the anti‑detriment death benefit provisions.

Another consideration is that most superannuation funds do not pay anti‑detriment death benefits where the member is in pension phase, as income streams complying with Superannuation Industry (Supervision) (SIS) legislation are exempt from paying tax. Therefore, the trustees cannot use the benefit of the deduction under subsection 295-485(3).

David Martin, Queensland
dmartin@moorestephens.com.au
David Martin is an authorised representative of Charter Financial Planning, Australian Financial Services Licensee (ASFL number 234655)


Contact

David Marti
T +61 7 3640 4041
dmartin@moorestephens.com.au

www.moorestephens.com.au