We observe an increasing number of issues popping up with regard to anti-detriment payments. In essence, these payments are a refund of contribution tax on a lump sum death payment. The refund amount is not obtained directly from the Australian Tax Office. Rather, the super fund is able to claim a tax deduction, which reduces the fund's assessable income and (consequently) should provide a tax saving equivalent to the anti-detriment amount.
With greater public awareness of this potential additional payment, the question is increasingly being asked as to why it was not received. So this blog article looks at whether the super fund could provide this payment; will they provide it; and - if they didn't - should they have provided it.
The "could" aspect is simple. In order to make an anti-detriment payment and be eligible for the tax deduction, the death benefit must be paid as a lump sum to one of the following beneficiaries:
a current spouse (including de-facto and same-sex partner;)
a former spouse;
a child of any age.
If the payment is via an estate the ultimate beneficiary must be one of the above.
Would the fund be willing to make the payment? There is no legal obligation for superannuation trustees to make this payment. A large APRA fund generally has tax liabilities and reserves that make it feasible, but this is different to the obligation to do it. SMSFs - on the other hand - may have funding issues that preclude or restrict their ability to do so.
Should the fund have made the anti-detriment payment? A good starting place is generally to look in their product disclosure documents or to simply ask them. There may be grounds for objection. For example, changes were made to the Superannuation Industry (Supervision) Act 1993 for same-sex couples. If a member of a same-sex relationship dies after 1st July, 2008 their fund can now include an additional anti-detriment payment. The complaint should initially be addressed to the fund and only lodged with the Superannuation Complaints Tribunal if not resolved at that level. There are time limits for lodgement.
If you need help with estimating what the size of the anti-detriment payment could be, NetActuary can help. Other types of issues would be more the province of a superannuation lawyer than an actuary.
The NetActuary Team