Fyffe v Fyffe
[2002] VSC 120
•24 April 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 4048 of 2000
In the matter of the will and estate of Jeffrey James Fyffe (deceased)
and
In the matter of an application pursuant to Part IV of the Administration and Probate Act 1958
| SARAH ALICE ELIZABETH FYFFE and ANOTHER | Plaintiffs |
| v | |
| ROSLYN GAIL FYFFE (who is sued in her capacity as Executive of the Estate of the abovenamed deceased) | Defendant |
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JUDGE: | Beach J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 April 2002 | |
DATE OF JUDGMENT: | 24 April 2002 | |
CASE MAY BE CITED AS: | Fyffe and Anor v Fyffe | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 120 | |
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Administration and Probate – testator’s family maintenance applications – estate of deceased consisting of superannuation – compromise of claims – liability of trustee to pay tax in respect of superannuation payment – Income Tax Assessment Act 1956 (Cth) – s. 27AAA.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr R. C. Wells | Robertson Hyetts |
| For the Defendant | Mr J. Pennell | Lucas Neale |
HIS HONOUR:
The plaintiffs Sarah Alice Elizabeth Fyffe (Sarah) and Mark James Fyffe (Mark) are children of the deceased Jerry James Fyffe. Sarah is the natural child of the deceased; Mark is an adopted child. Sarah was born on 21 September 1982; Mark was born on 18 October 1973.
The deceased died on 25 June 1999. Probate of his last will dated 28 August 1998 was granted to the defendant Roslyn Gail Fyffe on 6 March 2000.
The deceased made no provision in his will for the maintenance and support of Sarah and Mark.
On 10 January 2001 Sarah and Mark filed an originating motion in the court pursuant to Part IV of the Administration and Probate Act 1958 whereby they sought leave, out of time, to institute proceedings against the estate of the deceased for an order that provision be made for their maintenance and support out of the estate of the deceased. Their application for leave was granted by Bongiorno J on 2 March 2001.
The only asset of the deceased at the date of his death was an interest he had of some $750,000 in a superannuation fund with AXA Australia.
On 29 August 2001 a mediation was held in respect of the plaintiffs’ claims. The mediation was successful and resulted in a settlement of the plaintiffs’ claims and those brought on behalf of other infant children of the deceased.
Pursuant to the terms of settlement the defendant agreed to pay to the plaintiffs’ solicitors the sum of $147,500 in full and final settlement of the plaintiffs’ claim and inclusive of their costs of this proceeding including all costs reserved therefore.
The settlement was conditional upon the approval by this court of the compromise entered into that same day of the claims of the infant children of the deceased.
The compromise of the infants’ claims was approved by the court on 2 October 2001.
The plaintiffs’ solicitors have now received sums totalling $115,787.50 from the defendant in compliance with the terms of settlement.
The balance of $31,712.50 has been paid by the defendant to the Australian Taxation Office in fulfilment of the defendant’s obligations pursuant to the provisions of s. 27AAA of the Income Tax Assessment Act 1936 (the Act). That section provides that in certain circumstances a death benefit is taxable in the hands of a beneficiary or trustee of an estate.
Pursuant to the provisions of the Act a death benefit is a benefit paid in consequence of the death of a person to a defendant, or the legal personal representative of the deceased, or to any other person (eg a non-defendant).
A death benefit includes payments from employers of the deceased and from superannuation funds.
The Australian Master Tax Guide summarises the tax treatment of death benefits at p. 438. The sub-paragraph relevant for present purposes is sub-paragraph 3 which reads:
“(3)if the lump sum death benefit payment is made to the trustee of a deceased estate, the benefit can be passed on to dependants or non-dependants (or both) through the estate, but the trustee is liable for any tax payable. To the extent that dependants will benefit from the estate, the non-excessive amount is tax-free, and to the extent that non-dependants will benefit from the estate, the non-excessive amount is taxed in the estate as described above in (2) for payments to non-dependants (ie a maximum rate of 15% or 30% applies to the post-June 83 component depending on the source of the payment). Any excessive amount is taxed at 47%. Note, however, that no Medicare levy is added.”
On 28 March 2002 the plaintiffs’ solicitors filed a summons in the court seeking (inter alia) the following orders:
“(2)That pursuant to Order 22.02, or alternatively pursuant to the inherent jurisdiction of the Court judgment be entered for the Plaintiffs in this proceeding against the Defendant in accordance with the said terms of settlement and that the following Orders be made –
(i)That the Defendant forthwith pay to the Plaintiffs (via their solicitors, Robertson Hyetts of 51 Bull Street, Bendigo) the sum of $31,712.50; and
(ii)That the Defendant forthwith pay the further sum (by way of interest on the said sum of $31,712.50) calculated at the rate prescribed by the Penalty Interest Rates Act, for the period 9 October 2001 until the date of this Order.”
The case for the plaintiffs can be expressed quite succinctly.
By clause1 of the Terms of Settlement the defendant agreed to pay to the plaintiffs’ solicitors the sum of $147,500 in settlement of the plaintiffs’ claims and that is the end of the matter. If the defendant chose to pay a sum of $31,712.50 to the Australian Tax Office in respect of the plaintiffs’ liability for tax that was a decision of her own-making and she must now pay a similar sum to the plaintiffs’ solicitors.
It was not argued by counsel for the plaintiffs that the plaintiffs did not have a taxation liability in respect of the portion of the superannuation to be paid to them from their father’s estate, nor was it argued that the sum of $31,712.50 was not the appropriate figure.
I am by no means satisfied that the plaintiffs’ contentions are correct.
If my interpretation of the appropriate taxation legislation is correct a distribution from the superannuation fund in question constituted an Eligible Termination Payment (ETP) death benefit pursuant to s. 27AAA of the Act.
If a beneficiary was a dependant of a deceased person a lump sum death benefit ETP payment of the deceased paid to that dependant is tax free. If, however, a lump sum death benefit ETP of a deceased is paid to a non-dependant, then the lump sum death benefit ETP is taxable.
In the present case the plaintiffs were not dependants of the deceased at the date of his death.
In that situation the defendant as trustee of the estate of the deceased was liable to pay tax on that portion of the superannuation of the deceased to be paid to the plaintiffs, namely the sum of $147,500.
The defendant’s accountant calculated the taxation liability of the plaintiffs to be $31,712.50 which was the sum withheld by the defendant from the settlement moneys and paid to the Australian Taxation Office.
I can see no basis for finding that the defendant was not justified in making the payment to the Taxation Office she did. If she had not done so, ultimately, the plaintiffs would have been required to make the payment.
The plaintiffs’ summons filed in the court on 28 March 2002 is dismissed with costs to be taxed and paid by the plaintiffs.
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