The anti-detriment provisions provide a great planning strategy to all superannuation funds, where a member dies.
Generally, if the legislative requirements are met, they allow a superannuation fund to pay an additional amount to the deceased member’s dependants, on top of any death benefits sourced from the member’s account, representing the amount of contributions tax that the member has paid over his or her lifetime.
By return for making this payment, the fund can receive a tax deduction equal to the amount of the payment divided by 15%. Therefore, if the fund calculates that the member had paid $15,000 of contributions tax over his or her lifetime, and can finance and anti-detriment payment equal to this amount, the fund will receive a $100,000 tax deduction!
There are effectively four accepted methods for calculating the amount of contributions tax paid, but the easiest, if the information is available, is the ‘audit method’, which requires the SMSF trustee to ascertain the actual amount of contributions tax paid, by accessing the recorded amounts of contributions tax paid in each financial year.
Keep this in mind, it may be worth keeping such records now, especially for your own SMSFs, it could conceivably create a ‘tax-free’ SMSF!