A question we come across from time to time, the answer to which depends on the specific details in the pension documents. A pension will cease upon the death of a member, however this does not necessarily mean that pension minimums will not need to be met.
Where a pensioner dies, is there a need to make a minimum pension payment to the deceased/beneficiary?
Where a super income stream automatically transfers to a beneficiary on the death of a pensioner (an auto reversionary pension) you must ensure that the minimum pension payments continue to be made, including in the year the member in receipt of the original pension dies.
Where a pensioner in receipt of a non-reversionary account-based pension dies, there is no requirement for the minimum pension payment to be made in the year of death (TR 2013/5). If the deceased member’s benefits are subsequently used to commence a new pension to a beneficiary, you will be required to ensure the new minimum annual pension amount is paid in the relevant year.
Can ECPI still be claimed after the Date of Death?
Where a member who was receiving a non-auto reversionary super income stream dies, the fund will continue to be entitled to claim ECPI in the period from the member’s death until their benefits are applied to:
- Be paid out as a lump sum as soon as it was practicable to pay the superannuation lump sum; or
- Be paid out as a new pension as soon as it was practicable to commence the new pension.
What this means is that the earnings remain exempt from tax until the death benefit is paid to a dependant, or paid to the deceased member’s estate. The phrase as soon as was practicable is not defined by law, however the ATO suggests a timeframe not exceeding 6 months from the date of death to be an acceptable guideline.
For any technical questions, or to find out about how our services can support your business, call our team on 03-5226 3599 or email [email protected]. Also, follow us on social media to keep up to date with our latest posts and blogs.