The removal of a six-month timeframe from ATO guidance about the payment of death benefits has not lessened the requirement for auditors to check trustees are taking action in a timely manner, the Institute of Financial Professionals Australia (IFPA) has stated.
IFPA head of technical services Natasha Panagis said the change to the guidance, which took place in mid-June, did not alter the requirement under Superannuation Industry (Supervision) Regulation 6.21 to pay out a death benefit as soon as practicable, nor for auditors to check that is taking place.
“Although the ATO has removed this six-month reference, SMSF auditors still need to assess whether trustees have complied with Regulation 6.21 and that assessment needs to be based on whether trustees have acted reasonably and promptly given the circumstances of the fund and the members,” Panagis said during a presentation to IFPA members today.
“Things to take into account are how complex is the estate or the trust arrangements, how long will it take to get probate or letters of administration, whether the SMSF assets are easy to sell or value and whether trustees are making a genuine attempt to sort things out quickly.
“There are factors for auditors to consider and if delays go beyond a six to 12-month period, then the trustee should be encouraged to keep clear records showing why the delay happened, what steps they are taking to resolve it and any legal or administrative processes underway.
“Without this documentation, auditors may still need to qualify their report under the payment standards.”
She also noted there were steps trustees could take to prove they were being proactive in making efforts to meet their obligations under Regulation 6.21 alongside documenting each action and providing evidence to their auditor.
“Avoid indefinite delays. Trustees can’t use the removal of the six-month period as a reason to delay benefit payments for any strategic or investment purposes,” she pointed out.
“Also review liquidity to pay death benefits and make sure the fund holds assets that can be accessed to meet death benefit obligations when needed. This is particularly important for funds that hold significant property or unlisted investments.
“Understand exempt current pension income (ECPI) limits, which is the ability to claim ECPI as a deceased member’s pension-phase balance is still tied to how long the death benefit remains unpaid, and try not to take advantage of that.”
