ATO guidance on assessment of death benefit pensions


Tuesday 14 February 2017

The Australian Taxation Office (ATO) has published further draft guidance clarifying how superannuation death benefit income streams will be treated for the new $1.6 million transfer balance cap that applies from 1 July 2017.

The draft Guideline (LCG 2017/D3) confirms that a reversionary death benefit pension will be credited to the beneficiary’s transfer balance account. Reversionary pensions in place before 1 July 2017 will be credited on the later of 1 July 2017 and 12 months from the date of death of the original member. The amount of the credit will be the balance of the account on 30 June 2017. Where the pension reverts after 1 July 2017, an amount will be credited to the beneficiary’s transfer balance account 12 months after the date of death of the original member. The credit will be the balance of the account at the time of death.

Non-reversionary death benefit pensions will also be credited to the beneficiary’s transfer balance account. For existing death benefit pensions in place as at 1 July 2017, the value of the pension as at 30 June 2017 will be credited to the beneficiary’s transfer balance account on 1 July 2017. For death benefit pensions commencing after 1 July 2017, the value of the pension will be credited when the income stream commences.

Where a death benefit pension is commuted due to an excess transfer balance amount, the excess will need to be paid as a death benefit lump sum. It cannot be retained in an accumulation account.

The Guideline also confirms that a death benefit payable to a dependant can be rolled over from 1 July 2017. However, the rollover must be used to commence a new death benefit pension or paid out as a lump sum. It cannot be rolled over to an accumulation account.

Comments on the draft Guidelines are due by 10 March 2017.


Further information

ATO, Law Companion Guideline LCG 2017/D3 Superannuation reform: Transfer Balance Cap – Superannuation death benefits

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