Question of the week: What are anti-detriment payments?

SMSF technical expert and columnist for The Australian newspaper
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Q: What are anti-detriment payments?


A: In relation to superannuation, anti-detriment payments are a legislative devise to ensure benefits paid from a super fund aren’t reduced because of the impact of tax on super fund contributions.

There have been several of these available over the years, but only one survives and it relates to death benefits. However, it only applies to death benefits with the following characteristics:

  • The death benefit must have been paid as a lump sum.
  • Some or all of the death benefit must have come partly from contributions. If the death benefit comes solely from insurance proceeds, then the concession is unavailable.
  • The concession is only available if it is to be paid by a super fund trustee to the deceased’s spouse, former spouse or children.

In essence, when a death benefit is paid, the anti-detriment provisions are available to ensure the death benefit isn’t reduced by any tax paid on super contributions.

In practise, a super fund increases a death benefit by working out how much that benefit has been impacted by contributions tax. Most super funds use a special formula from the Australian Taxation Office (ATO) to work out how much the death benefit needs to be increased by.

The increase in the death benefit is then claimed by the super fund as a tax deduction. This process allows the fund to recoup the additional benefit from the Government.

It’s worth noting that a problem arises if the fund isn’t paying income tax and can’t get the payment back.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should consider the appropriateness of the information in regards to their circumstances.

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