An SMSF specialist has debunked two myths regarding death benefits with one being the account from which a pension can be commenced by a recipient and the other being the ability for that individual to access the money in question.
“It seems to me some people out there have the view you can only start a death benefit pension with benefits that come from a pension interest already. That is not true,” Accurium senior SMSF educator Anthony Cullen told advisers and accountants during a technical webinar hosted today.
“There is nothing in the regulations that differentiates between whether the deceased member’s benefits are in accumulation [or pension phase regardless of whether the income stream is] non-reversionary or reversionary,” he confirmed.
“The reality is [Superannuation Industry (Supervision) Regulation] 6.21 [only] tells us that the death benefits have to be dealt with as soon as practicable.
Cullen also addressed the ability of a recipient to access a death benefit when they themselves have not satisfied a condition of release.
“The other question we receive a lot is what happens if the recipient is under preservation age and has not met a condition of release of their own. The fact is that the death of the primary member is the condition of release. So that makes everything unrestricted,” he explained.
“So regardless of what the recipient’s age is they are going to be able to start the death benefit pension if they are eligible to do so.”
He also took the opportunity to point out death benefits can now be rolled over but that a specific administrative requirement must be followed.
“These days the laws have been changed and so we are allowed to rollover death benefits. However when you rolling [a death benefit] over you [need] to use a specific death benefit rollover form so the receiving fund knows that it is a death benefit,” he said.
“The receiving fund will then have to treat it as a death benefit and will need to consider the [relevant] cashing requirements.”
