On 30 July 2013 the ATO issued TR 2013/5 - the final ruling on
when an account based or transition to retirement income stream
commences and ceases. This was initially released in July 2011 as
When the ATO's view applies from
TR 2013/5 applies from 1 July 2007. The good news is the ATO
will not take any compliance action where an income stream ceased
because of the death of a member before the 2012-13 income
When a pension starts
A pension starts when the pension documents say it starts,
can be before the date of the first payment, but
cannot be before the member applies for a pension; and
cannot be before the trustee of the fund receives the rollovers
or contributions that are funding the pension.
This confirms the importance of ensuring pension documents have
a start date that is consistent with the trust deed.
When a pension stops
A pension stops:
when the trustee does not comply with the rules for the pension
(for example, does not make the minimum payment during a year), in
which case the pension ceases on 1 July of the financial year in
which the non compliance occurred;
when the amount supporting the pension runs out;
when a pension is wholly commuted (which depends upon the
wording of the trust deed and the process of the commutation);
upon a member's death, except where the pension
'automatically transfers' to another person (for example
because the pension is reversionary, the trust deed requires it to
continue in that way, or there is a binding death benefit
nomination requiring the benefit continues as a pension).
This largely follows the ATO's position in the draft ruling
except that the ruling as to when the pension stops as a result of
commutation is more favourable than in the draft ruling where the
ATO considered the pension ended as soon as the member asked for a
However, the tax regulations have recently changed to provide
for income earned on assets supporting a pension to continue as
exempt current pension income after the death of the pensioner in
some cases (
click here for more information). Where the regulation applies,
this is also a more favourable position than the ATO view in the
draft ruling where they had indicated the tax exemption ceased on
the death of the pensioner.
Take home messages
Death benefit planning is still vital for clients with
superannuation balances, particularly once they are in pension
phase. The need for pensions to be reversionary, binding death
benefit nominations or tailored trust deeds should be considered as
part of an estate plan that takes into account the ATO's
position and other practical issues with the death benefit
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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