AAS Blog

ATO updated guidance on death member benefit payments

February 2023

The ATO have recently release an updated guidance on death and member benefits payment which could affect how these payments are managed by Trustees going forward.

The updated guidance was given in an example whereby a request to make a payment to another member was received by the Trustees however by the time the payment was made, the member was deceased.

Why this is potentially a big issue, is that in the ATO’s example because the Trustees were aware that the member was deceased then arguably the payment to the member is a death benefit payment which has different tax consequences to a member payment.

The reason being that a death benefit payment is taxable to a nondependent, whilst a member payment is received by the member or estate is the member is deceased tax free.

Death benefit payments for SMSF Trustees are one on the most complex areas of the SIS Act and need to be treated with care, particular when the deceased member has a pension and is over their preservation age.

As always the key is to ensure the paper work is in order.

In the coming months AAS is looking at running a webinar on death benefit payments and looking at this issue in more details.

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