The ruling (1052304503137) dealt with a member, over 65, who held two superannuation accounts within his SMSF. The member had no death benefit dependants for the purposes of the Income Tax Assessment Act 1997 (ITAA 1997), was a director of the SMSF’s corporate trustee and a member as well as the corporate trustee of SMSF Company A.
At the relevant time, there were five directors of Company A, including the member. The majority of units held by the SMSF were units held in unlisted unit trusts (the investment funds) managed by Company B. Company B was an unrelated third party.
On Date A, the member requested an in-specie lump sum withdrawal from the SMSF to the trust, in which the member was a director of the corporate trustee. The lump sum withdrawal was to be comprised of the units in the investment funds managed by Company B.
Company A acknowledged the request by the member on Date A.
On Date A, the following forms were completed, signed, and emailed to investor relations at Company B:
• Unit transfer forms.
• A subscription agreement for the Investment Funds signed by both X and the Member as directors of the trust.
• A ‘CRS self-certification form’ signed by X and the Member as the controlling person for the trust.
• An ASIC extract for the trust.
As per advice from the head of investor relations at Company B, the “dealing date” listed on the forms was a future date, Date B, being the date after the valuation date.
The investment funds are unlisted unit trusts and, as a result, there are some restrictions concerning when their units can be valued and transferred/redeemed.
Concerning the transfer of units, the information memoranda do not state specifically when the units will be transferred. Rather, they said that no units can be transferred without the prior written consent of the investment manager.
The memoranda stated that a unit holder may transfer the units by returning the transfer form, which, if applicable, has been stamped for duty by the appropriate duties office, together with the subscription agreement completed by the new owner.
Both information memoranda said that, in general, redemptions may be made at the end of each calendar quarter, provided a redemption request is received at least 45 calendar days before the proposed redemption date. The trustee of the investment funds may, in its discretio,n accept another date/or allow redemption with longer or shorter notice periods.
If the request is received after the deadline for receipt for a particular redemption date, it will be treated as being a request for redemption on the next relevant redemption date.
Redemption requests are irrevocable, unless otherwise agreed by the investment manager.
For both investment funds, the redemption price is determined with reference to the net asset value of the fund as at the last calendar day of the preceding quarter.
The tribunal heard that shortly after the requisite transfer forms were lodged, Company B provided notice to Company A, acknowledging the transfer of the units with a registered dealing date of Date B, being the day after the valuation date.
The member passed the day of Date C, which was a short time before Date B.
The transfer of the units from the SMSF to the trust occurred on Date B. The member acknowledged that the dealing date would be Date B when signing the documentation for the transfer on Date A.
An email confirmation from the investor services on behalf of Company B was delivered to Company A on Date D, saying the transfer of the above listed units was confirmed to have occurred on Date B.
The directors of Company A were aware of the member’s death before Date B.
The ruling said that as the member was over 65 at the date of their death, they had already satisfied the condition of release, which has ‘nil’ cashing restrictions. Under regulation 6.12 of the SISR, the member’s benefits were all converted to unrestricted non-preserved benefits upon meeting a condition of release with ‘nil’ cashing restrictions.
“Under subregulation 6.20(1) of the SISR, a member’s unrestricted non-preserved benefits in a regulated superannuation fund may be voluntarily cashed at any time. As per subregulations 6.20(2) and (3) of the SISR the whole or a part of the member’s unrestricted non-preserved benefits may be cashed as one or more lump sums or one or more pensions. Under subsection 6.01(2) a lump sum can be paid by an in-specie transfer, which states that a lump sum includes an asset (in Part 6 of the SISR but not in Schedule 1),” it read.
“Under subregulation 6.21(1) of the SISR, a member’s benefits in a regulated superannuation fund must be cashed as soon as practicable after the member dies. Paragraph 6.21(2)(a) dictates that benefits must be cashed as single lump sums for non-dependants; only dependants (for SISR purposes) may cash benefits in the form of a superannuation income stream in the retirement phase, as per paragraph 6.21(2)(b) and subregulations 6.21(2A) and (2B) of the SISR.”
It continued that under subsection 307-15(2) a payment may still be a superannuation member benefit even if it is requested the payment is made to someone else or is rolled over to another fund.
Furthermore, the ruling said the in-specie transfer benefit paid from the member’s account as requested before their death on Date A but received by the trust after their death on Date C, is a superannuation lump sum – a straightforward application of subsection 307-65(1) of the ITAA 1997.
“An amount that a member requested to be paid from their superannuation fund before their death but was paid after their death is generally a death benefit, but may be classified as a member benefit instead of a death benefit depending on the facts and circumstances of the payment.”
“A trustee of a regulated superannuation fund can only pay superannuation benefits according to the fund’s governing rules, including the fund’s trust deed and relevant legislation. These governing rules set out when benefits can be paid and who they can be paid to, including after a member’s death. A superannuation fund’s governing rules must be read carefully to determine a member’s benefit entitlements in the event of death.”
In this instance, the ruling stated that at the time the SMSF submitted the payment request, the member had already satisfied a ‘nil’ condition of release and their superannuation benefits had been converted to unrestricted non-preserved benefits.
As part of the member’s request, it advised that the units were to be transferred to the trust. To facilitate the request and transfer the units in the investment funds to the trust, the trustee of the SMSF completed and lodged Australian Standard Unit Transfer forms on the same day as the member’s request.
As advised by the head of company B, the purchase date was listed as Date B, notwithstanding, that the member’s request was made, and the forms were signed on Date A.
