SMSF trustees wanting to hold risk cover, such as total and permanent disablement (TPD) insurance, containing own-occupation definitions need to act now before new rules governing the sector come into effect on 1 July, according to a specialist legal practitioner.
“If an SMSF trustee comes to you and says they want TPD cover with an own-occupation condition or trauma insurance in their fund, what can you tell them? To get their skates on,” DBA Lawyers director Daniel Butler said.
“You can do own-occupation and you can do trauma cover prior to 30 June this year, but beyond 30 June you won’t be able to hold either in a fund, be it a large fund or a small fund.”
Getting in before the 30 June deadline would be a prudent move for those wanting that type of cover in their SMSF, because the new rules came with grandfathering provisions, allowing those insurances to continue if they were already in existence, Butler said.
“Also, if you choose to continue these types of insurances, you can increase or decrease the level of cover and you can adjust the premiums accordingly,” he said.
The changes to the rules relating to holding risk cover within a super fund in force as at 1 July concern the conditions of release as defined in the Superannuation Industry (Supervision) Regulations.
“From 1 July, you can only provide insurance that is consistent with the specified conditions of release, such as death, terminal medical condition, TPD covering any occupation, or temporary incapacity,” Butler said.
He added while opinion was still divided about the validity of cross-insurance after 30 June, the likelihood was this cover would still be allowable under the new rules.
