Superannuation funds: Retain pension exemption after death
- 05 August 2013
Recent legislation amendments introduced by the government are intended to provide deceased estates with ‘tax certainty” in the situation where a person has died while in receipt of a superannuation income stream.
In very broad terms, a superannuation fund is entitled to a tax exemption for income that supports the payment of superannuation income stream benefits (i.e. superannuation pensions). The amendments are intended to ensure that, where a complying superannuation fund member was receiving a superannuation income stream immediately before their death, the superannuation fund will retain its entitlement 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;
This is subject to the benefits being cashed as soon as practicable. In addition, the level of the exemption would be no greater than it was before the member's death (allowing for investment earnings after the member's death).