Superannuation — tax certainty for deceased estates – Government MYEFO announcement good for SMSFs


The release of draft taxation ruling TR 2011/D3 in July last year caused much concern when it suggested that the pension exemption ceases automatically upon death (unless a reversionary pension was in place).

Under those proposed rules if an SMSF member died with assets carrying unrealised Capital Gains, even if the deceased were receiving a pension, upon death the pension would cease (unless the pension qualified as an auto-reversionary pension). If SMSF assets were then sold/transferred, the SMSF would have CGT implications. 

The Government has announced today as part of  The Mid-Year Economic and Fiscal Outlook that:

The Government will amend the law to allow the tax exemption for earnings on assets supporting superannuation pensions to continue following the death of a fund member in the pension phase until the deceased member’s benefits have been paid out of the fund. This change will have effect from 1 July 2012. This measure is estimated to have a small but unquantifiable cost to revenue over the forward estimates period.

The superannuation law requires the benefits of a deceased member to be paid out of the fund as soon as practicable following the member’s death. The continuation of the earnings tax exemption beyond the death of a member will be subject to this existing requirement.

This change will benefit the beneficiaries of deceased estates by allowing superannuation fund trustees to dispose of pension assets on a tax‑free basis to fund the payment of death benefits.

For further information on the issues raised in this blog please contact our Castle Hill SMSF Centre or Windsor Financial Planning Office.

I hope this guidance  has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, put on your Facebook page if you found information helpful.

Liam Shorte B.Bus SSA™ AdvDipFS AMC

Financial Planner & SMSF Specialist Advisor™

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Verante Financial Planning

Tel: 02 8853 6833,  Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St, Castle Hill NSW 2154

308 George St, Windsor NSW 2756

 

ABN 20 060 778 216 • AFSL No.232686

Liam Shorte is a partner in Verante Financial Planning, Corporate Authorised Representative of Genesys Wealth Advisers Limited, Licence No 232686, Genesys Wealth Advisers Limited ABN 20 060 778 216.

Important information :

The information in this article is provided for illustrative purposes only and does not take into consideration your personal circumstances. You are encouraged to seek financial advice suitable to your circumstances to avoid a decision that is not appropriate. Any reference to your actual circumstances is coincidental. Genesys and its representatives receive fees and brokerage from the provision of financial advice or placement of financial products.

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2 Comments

  1. Peter, The announcement states that the amendment to the legislation will apply from 1 July 2012, whereas the draft ruling TR 2011/D3 proposes that a pension will cease on death, unless there is absolute certainty as to whom it should continue to be paid to, after 1 July 2007. As the new announcement covers the period from 1 July 2012, the question remains, how will pension assets be taxed, following death in the period 1 July 2007 to 30 June 2012.

    I will keep you updated if there is any clarity provided for the 2007-2012 period. Thanks for reading the blog

    Liam

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  2. peter shanahan

     /  October 23, 2012

    Hi Liam,

    The original ATO draft ruling was retrospective to 2007. Is there any indication what this latest announcement means for the period between 2007 and when this new law takes effect on 1/7/2012?

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