ATO, Regulation

Death benefit lump sums unclear

Death benefit lump sums

The ATO is yet to provide definitive guidance on death benefit lump sums and whether multiple payments can be made, a technical expert says.

The issue of whether the payment of several lump sums can be made from a death benefit pension remains clouded, with the ATO yet to provide any definitive guidance on the subject, a technical expert has said.

“The question arises because the rules for taking death benefit lump sums say you need to take an initial payment and a final payment, [meaning] you can really only take two death benefit lump sum payments,” Accurium general manager Doug McBirnie said during his organisation’s latest technical webinar.

“The question then is if I take my death benefit as an income stream does that limit of two lump sum payments still apply.”

According to McBIrnie, the ATO has not provided any clarification regarding this situation, but shared Accurium’s technical interpretation of the situation.

“Our view would be that you can [take more than two lump sum payments]. The act of taking your death benefit as an income stream is [considered] cashing the benefit,” he noted.

“[So] as long as you continue to take payments from that income stream, whether that is [by way of] lump sums or pension payments so you continue to cash that benefit, I think [taking more than two lump sums] is okay.”

Accurium SMSF technical services manager Melanie Dunn said guidance from the ATO would be helpful for practitioners having to deal with this issue on behalf of their clients.

“It would be certainly something that could provide some clarity for those persons receiving these types of death benefit income streams,” Dunn said.

The ability to take more than two lump sums aside, McBirnie reiterated there is one course of action that cannot be taken when dealing with death benefit pensions.

“What you can’t do is move [any part of the death benefit income stream] back to accumulation [phase],” he said.

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