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Blog

October 23rd, 2012
Relief from SMSF Death Benefit Capital Gains Tax by Daniel Martinez

The Government’s Mid-Year Budget and Fiscal Outlook papers contained an announcement that will bring a major smile to the faces of SMSF trustees. There has been some doubt that unless there was an eligible reversionary pension beneficiary, a pension ceased on the death of the member. This view had the unfortunate consequence of some funds facing potentially large capital gains tax bills when it came time to paying the death benefit to beneficiaries. Effectively, from July 1 2012, this anomaly has been clarified and rectified.

The announcement states:

“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.”

In other words, so long as the death benefit is paid to beneficiaries as soon as practicable, there will be no capital gains tax to pay.

This announcement is welcomed, and the government is to be applauded for taking this action.

Bye for now

Dan’s Corner
Source David Busoli Cavendish

General Advice Warning – This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances.

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