In-specie death benefits complex

in-specie death benefits

In-specie death benefit transfers are problematic, but a pragmatic approach to these transactions can provide a compliance solution.

A technical expert has suggested a common-sense compliance approach is most likely to be applied with regard to the transfer of in-specie death benefits in the context of the lump sum restrictions contained in the superannuation regulations.

In-specie death benefit transfers are treated as lump sums and a potential compliance issue can arise if a death benefit payment of this kind involves several separate parcels of different shares.

“Lump sum payments can be only paid in two components per beneficiary, per interest. So if we’re transferring parcels of shares, the [critical] interpretation will be whether each parcel of shares will be regarded as one lump sum payment,” Accurium head of education Mark Ellem told attendees during a panel session at the selfmanagedsuper SMSF Professionals Day 2022 held in Sydney recently.

“I would suggest that you’d be making the transfer of the different parcels of shares all on the same date and have that recorded as one benefit payment.

“The risk is if you transfer the shares on different days, that would be classified as separate benefit payments that would likely breach the regulations.”

Fellow panellist SuperGuardian education manager Tim Miller acknowledged a solution to the matter is not straightforward as in-specie contributions of several parcels of different shares would be treated as a series of separate contributions.

“If you look at the flipside, you’d have to apply the same approach to in-specie death benefit payments. So it’s quite problematic to do in-specie death benefit transfers,” Miller said.

However, he pointed out pragmatism could ultimately provide a workable outcome.

“But then there has to be a practical point of view here. So [you have to ask] is the tax office looking for a solution or is the tax office looking for a problem.

“If the solution is just to get the death benefit paid out, then there should be no fixation on the two lump sum rule.”

ATO SMSF approved auditor portfolio director Paul Delahunty said the suggested solution makes sense when looking at achieving the best result, but also that each individual in-specie death benefit scenario had to be assessed separately.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital