01 Aug 13 When a superannuation income stream commences and ceases - TR 2013/5
This Ruling explains when a superannuation income stream commences and when it ceases, and consequently when a superannuation income stream is payable. These concepts are relevant to determining the income tax consequences for both the superannuation fund and the member1 in relation to superannuation income stream benefits paid
This Ruling applies from 1 July 2007.
However, the Ruling states that the Commissioner understands that there are a range of current practices that derive from views that are different from those expressed in this Ruling. Having regard to the need to allocate compliance resources the Commissioner considers that it is not appropriate for the ATO to take compliance action to apply the views of the law expressed in this Ruling with regards to when a superannuation income stream ceases on the death of a member before the 2012-13 income year.
The Ruling also states as follows:
"Further, draft Taxation Ruling TR 2011/D3 stated that upon a partial commutation of a superannuation income stream the resulting payment was a superannuation lump sum for income tax purposes as the member, by making the choice to partially commute the income stream was also taken to have made an election under paragraph 995-1.03(b) of the Income Tax Assessment Regulations 1997 (ITAR 1997) for that payment not to be treated as a superannuation income stream benefit (effectively, for the payment to be treated as a superannuation lump sum). However, this Ruling requires the person to actually make the election before a partial commutation payment is made for that payment to be treated as a superannuation lump sum. The requirement to actually make the election under regulation 995-1.03 of the ITAR 1997 applies from the date of issue of this Ruling. For a partial commutation payment made before the date of issue of this Ruling that payment is a superannuation lump sum payment unless the person has treated the payment as a superannuation income stream benefit."
Note also that on 22 October 2012, the Government announced that it will amend the law to allow the pension earnings tax exemption to continue following the death of a pension recipient until the deceased member's benefits have been paid out of the fund (subject to the benefits being paid as soon as practicable). The measure applies to the 2012-13 and later income years - see the media release No 2013/001 of the former Minister for Financial Services & Superannuation dated 29 January 2013.