Benefit delay needs evidence

SMSF trustees no longer have to act with haste to pay a death benefit, but timeframes that are excessively long should have documented reasons as to what is causing any delays, an SMSF specialist has stated.

Westover Advisory principal Liz Westover said the shift from a defined period in which to pay a death benefit to ‘as soon as reasonable’ still placed limits on when a trustee should act.

“We used to have law that said you have got six months to pay death benefits. That doesn’t really apply anymore,” Westover stated during a presentation at the SMSF Association Technical Summit 2026 in Sydney today.

“The ATO probably has a view that six months would be reasonable, but the more complicated a death benefit matter can become, six months is often not reasonable, so that it why it is now as soon as reasonable to do so.

“Some of the things that would cause delays are disputed claims [to the benefit], identifying beneficiaries, illiquid assets, missing paperwork, but there could also be health issues with the remaining trustees.

“We often see it with elderly clients where one passes and the second one either goes into depression or struggles with life after their death.

“There are a range of circumstances that may mean two years is reasonable. The thing to remember is that you might need to provide support around that.

“So if you are delaying and have not paid it in two years’ time, you would want to have a reason for that and your auditor might also want to know about it.”

She also warned attendees to be careful about the reasons trustees could use to create an unreasonable basis for delaying a payment.

“The fact they don’t want to realise a tax event isn’t enough reason,” she added.

“They may not want to sell an asset. Bad luck, you might have to, but you don’t have to sell the asset ‘at all costs’.

“If you are trying to sell a property and it is a really bad market and you know the value might go up in a reasonable time, that might just be an argument for waiting.”