The Government has announced it will pass legislation to extend
the tax-free status of income supporting a superannuation pension
until a deceased member's benefit has been paid from the fund.
This will be effective from 1 July 2012 and will also apply for
self-managed superannuation funds.
As a result, a pension being received by a deceased member will
be taken to continue after death for tax purposes. This means a
trustee can now dispose of assets after the death of a member who
was receiving a pension tax-free (to the extent the assets were
supporting that pension) to fund the payment of a death
This clarifies the uncertainty caused by the position adopted by
the Australian Tax Office (ATO) in TR 2011/D3. In that ruling, the
ATO provided its view that a pension stops when the pensioner dies,
unless either the pension was automatically reversionary or the
pensioner had made a binding death benefit nomination that required
their death benefit to be paid as a pension.
However, the ATO's view that a pension stops upon a
member's death, except where:
the pension is reversionary to another beneficiary or
there is a binding death benefit nomination in place that
specifies the benefit must be paid as a pension
is not relevant after 1 July 2012 (assuming the announced change
What it means for you
The draft legislation is yet to be released so there is some
risk this important change may not be fully implemented. Therefore,
until there is more certainty it would be prudent to adopt a
Where there is a risk that a pension ceasing on death will cause
considerable tax implications, the member should still consider
the pension reversionary to their surviving spouse or other
a binding death benefit nomination that specifies both the
beneficiary and that the pension must continue to be paid to that
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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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