A technical specialist has reminded practitioners that the account in which the deceased member held their superannuation assets, that is, in either accumulation or pension, does not limit the method by which a death benefits can be paid.
Speaking at the recent SMSF Auditors Association of Australia conference held in Sydney, Heffron SMSF technical and education services director Leigh Mansell told attendees: “People get a little bit confused [thinking] if the deceased member had [a balance in] accumulation [phase only], then all you’re allowed to do is pay [the death benefit via] a lump sum because they weren’t in pension phase. That’s not true.
“What the deceased member has [in the fund] doesn’t determine how the death benefits are cashed, with the exception of a pension the deceased had that had a reversionary pensioner.”
Mansell pointed out a reversionary pension is effectively the same pension but with a different owner attached to it.
“All you’ve basically done is rip somebody’s name off the top [of the pension] and put another name over the top of it,” she noted.
With regard to the cashing instructions of death benefits, she noted the Superannuation Industry (Supervision) Act states death benefits can be paid by using a lump sum or a pension but that only certain beneficiaries are allowed to be paid a pension.
“So occasionally we get people who are a little bit confused [about this, thinking] the deceased only had a pension account and that means we can only pay [death benefits] pensions from it,” she said.
“No, that’s what they had. Draw a line in the sand. They’ve died. Now we’re dealing with death benefits and the rules are [we can pay] lump sums or pensions to certain beneficiaries.”
She stressed if a death benefit is to be paid out by way of lump sums, then only two lump sum payments to one beneficiary are allowed.
