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13 Nov 1212 Pre-retirement super withdrawals assessable - Peach

The AAT has found that a taxpayer who withdrew money from his self-managed superannuation fund did not satisfy any of the conditions of release. The amounts withdrawn were therefore assessable income in his hands, and there was no reason to exercise a discretion to exclude those amounts from the assessable income.

Over a period of years, the taxpayer withdrew various amounts from his super fund, apparently to defray living expenses and, at a later point, because he lost his employment and was without income for some time. The evidence made it clear that he did not intend to retire. He approached Centrelink for assistance at one point but he was never in receipt of any benefits.

Under the Superannuation Industry (Supervision) Regulations, money in a fund can be withdrawn by a member if the member first satisfies a condition of release set out in the regulations. In this case, the Commissioner decided, and the AAT agreed, that the taxpayer satisfied none of the conditions of release. There was no evidence to suggest the trustee was reasonably satisfied that the taxpayer never intended to again become gainfully employed before the funds were accessed. The taxpayer was not in severe financial hardship, because that condition of release requires the trustee to sight evidence provided by a Commonwealth government agency that the taxpayer was in receipt of Commonwealth income support payments for a continuous period prior to the time the approach to the trustee was made; no such benefits had been paid. Finally, release on compassionate grounds was not available.

The amounts withdrawn were therefore assessable income of the taxpayer under s 304-10(1) of the ITAA 1997. The Commissioner’s discretion under s 304-10(4) should not be exercised in the taxpayer’s favour.

Re Peach and FCT [2012] AATA 781 (Senior Member B J McCabe, 9 November 2012).

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