SMSF death benefit rollover guidance issued

SMSF death benefit rollover

The ATO has expanded its guidance on how death benefit rollovers should be reported and payments made with specific instructions for SMSFs.

The ATO has added to its clarifications on how death benefit rollovers should be reported and payments made by providing specific guidance for SMSFs.

The regulator has already released guidance on how these things were to take place within Australian Prudential Regulation Authority-regulated funds following changes to the Treasury Laws Amendment (2019 Measures No 3) Act 2020, which took place on 22 June, but were backdated to mid-2017.

Under the changes, any untaxed element determined under section 307-290 of the Income Tax Assessment Act 1997 (ITAA) is not to be included in the receiving fund’s assessable income.

While the reasoning for the guidance issued to SMSFs does not differ from the guidance given to APRA funds, the reporting and payment of death benefit rollovers differs between the two types of funds, with APRA-regulated funds having to consider if the rollover came from a taxed or untaxed fund and report accordingly.

SMSFs will not have to make this distinction, with the ATO stating “SMSFs completing item 16 of the death benefits rollover statement do not need to include an element untaxed in the fund. Any amount that may be determined under section 307-290 can be reported as a taxable component – element taxed in the fund”.

The ATO also provided guidance for when a receiving fund claims a deduction for life insurance premiums under the ITAA 1997, stating “in respect of insurance offered to the dependent beneficiary as part of their new interest, the fund will be required to apply section 307-290 of the ITAA 1997 to any subsequent death benefit lump sums paid from that interest”.

In related news, the ATO stated it had completed the mail-out it began in early September regarding SMSF auditor number (SAN) misuse for the 2019 income year and urged auditors to confirm the information sent to them.

“All SMSF auditors should have a list of clients that have reported to us that they were the ones to conduct an audit on the clients’ SMSF,” it said.

“Auditors are encouraged to check their lists carefully and report to us whether their SAN has been misreported on a 2019 SAR and whether the audit completion date we have on record is correct.”

It stated that even where information was correct, SMSF auditors should respond to the regulator informing it of the accuracy of the SAN data.

Auditors have been slow to respond to two previous SAN misuse mail-outs conducted by the ATO, with only 50 per cent responding to a mail-out for the 2017 financial year and only 40 per cent responding to one for the 2018 financial year, it stated earlier this year.

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