Family members administering an SMSF after the death of its members can apply for exempt current pension income (ECPI) on income streams even when they failed to pay any minimums before the members died, according to an SMSF lawyer.
DBA Lawyers special counsel Bryce Figot gave the example of a fund with two members, a husband and wife, where each was receiving an account-based pension that was reversionary to the other, and the husband died during the 2021 financial year and the wife died in the 2024 financial year before either had paid any minimums.
“My question is, here we are in the 2025 financial year, and is the SMSF eligible for ECPI even though the fund failed the minimum for both pensions in the current financial year?” Figot said during a recent online presentation.
Figot noted pinning down the part of the superannuation regulations that address this was difficult, but the ATO had provided a short-form guide on its website under QC 26864.
He said while the ATO page refers to non-reversionary pensions, it applied in this case as consideration had to be made to the last surviving person, and in his example it did not matter where that person got their pensions from.
“The ATO are talking whether the pension you are in receipt of now is going to revert to someone else, which it’s not, so this does apply,” he added.
“That page states: ‘From 1 July 2012, Income Tax Assessment Amendment (Superannuation Measure No 1) Regulation 2013 ensures that where a member who is receiving a non-reversionary super income stream that was in the retirement phase dies, the fund will continue to be entitled to claim ECPI in the period from the member’s death. This is until their benefits are applied to commence a new super income stream or paid as a lump sum, subject to the benefits being cashed as soon as practicable.’
“The reason why I say the SMSF may well be eligible for ECPI, last financial year and this financial year, is still premised on the idea of being able to say the benefits are being paid as soon as practicable.
“If it’s paid within one month, that’s definitely going to be viewed as soon as practicable. Within six months, you’re probably fine. Within a year or 18 months, you’re probably still fine, but you’re starting to push it at more than two or three years, unless you can point to something funky, such as litigation, to say that it’s still as soon as practicable anyway.”
