The AAT has held that a lump sum payment made to the taxpayer by the trustee of a self-managed superannuation fund prior to his retirement was in breach of the payment standards prescribed by s 31(1) of the Superannuation Industry (Supervision) Act 1993 (SISA), and was therefore correctly included in his assessable income for that year pursuant to s 304-10(1) of the ITAA 1997.
At the time of the payment to the taxpayer had attained the preservation age of 55 (he was, in fact, 60 years of age). Schedule 1 to the Superannuation Industry (Supervision) Regulations 1994 provides that, if the condition of release is retirement there is a nil cashing restriction. Therefore the benefit could be paid in a lump sum or sums. In contrast, if the condition of release is attaining preservation age, then there are cashing restrictions. In this case, the taxpayer could have been paid a transition to retirement income stream, but instead the benefit was paid in a lump sum. The taxpayer had not retired at the time of payment and the payment was therefore in breach of the payment standards and was correctly included in his assessable income under s 304-10(1) of the ITAA 1997.
Under s 304-10(4), the Commissioner can exclude an amount, included in a person’s assessable income under section 304-10(1), from the taxpayer's assessable income to the extent that the Commissioner is satisfied that it is unreasonable that it be included, having regard to the nature of the fund and any other matters that the Commissioner considers relevant. The Commissioner refused to exercise his discretion and the AAT agreed that there were no grounds for the favourable exercise of the discretion. The Commissioner's objection decision was affirmed.
Mason and FCT  AATA 133 (24 February 2012).