Exempt current pension income (ECPI) can still apply to a death benefit pension even if the cashing of the death benefit in question occurs after an extended period of time, a technical expert has said.
Under the law, a non-reversionary superannuation death benefit pension has to be paid out “as soon as practicable” to retain its pension status and its associated ECPI, however, the period of time pertaining to this notion has not been specifically defined.
This has led some practitioners to question how much time would be considered “as soon as practicable”. For example, one registrant for Accurium’s latest technical webinar asked whether ECPI could still be claimed if it legitimately took over a year to pay the death benefit pension.
“The ATO guidance that we’ve got on this says as long as the death benefit was paid as soon as practicable, then ECPI continues for that pension from the date of death right through until the last death benefit is paid,” Accurium general manager Doug McBirnie said.
“In the examples they give on their website they suggest a reasonable time frame for as soon as practicable to be around six months, so two years is a long time.
“But we’ve certainly had plenty of situations where it has been not possible to pay [the death benefit] within that sort of time frame.”
According to McBirnie, the exceptionally long time frame involved would not automatically disqualify ECPI from being claimed on the death benefit pension, but he noted those producing an actuarial certificate in these situations would require more information than usual.
“When it comes to the actuarial certificate, if you’re talking to us about it, we’d want to understand why [it took] so long,” he said.
“[Also] we’d probably put a note in our certificate to say this is a [significant] amount of time, these are the reasons, and we’d recommend that the auditor agrees this is a reasonable time frame.”