The Government has made amendments to provide tax certainty for deceased estates in a situation where a person has died whilst in receipt of a superannuation income stream/pension.
A superannuation fund is entitled to tax exemption for income that supports the payment of a superannuation pension.
The term “superannuation income stream benefit” and the meaning has been expanded for the purposes of the earnings tax exemption.
The expanded meaning of this term ensures that, where a superannuation fund member was receiving a superannuation pension immediately before their death, the superannuation fund will continue to be entitled to the earnings tax exemption in the period from the member’s death until their benefits are cashed:
* by paying them out as a lump sum; and/or
* by commencing a new superannuation income stream;
subject to the benefits being cashed as soon as practicable.
The level of exemption will be no greater than it was before the member’s death.
Also, the tax-free and taxable components of that superannuation income stream are to be used in calculating the tax components of the superannuation benefits paid after the death of a person who is receiving a superannuation income stream immediately before their death.
The amendments apply from 1 July 2012.
If you are currently drawing a pension from your superannuation fund and would like to ensure that you can take full advantage of these changes, please contact Ellingsen Partners.