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ATO provides solution for commutation of Death Benefit Pension back to Accumulation Phase.

We recently published a blog highlighting potential problems with members receiving death benefit pensions and the interaction with the transfer balance cap.

The problem arises where a member needs to commute a death benefit pension to avoid an excess transfer cap balance.  The ATO interprets the existing law as to require a commuted death benefit pension to be cashed out of the Fund.  It cannot remain in accumulation phase.

As you can imagine this may have resulted in a pre-30 June rush to rearrange affected SMSF’s to avoid excess balance problems.

 

ATO comes to the rescue..?

The ATO have issued Practical Compliance Guideline PCG 2017/6 to provide relief where a member needs to commute a death benefit income stream to comply with the $1.6M transfer balance cap.

The ATO comment that they will not be applying resources to review whether commutations of death benefit income streams back to accumulation phase made prior to 1 July 2017, comply with the compulsory cashing restrictions.

 

The Green Light?

It appears the ATO is giving the green light to members commuting death benefit income streams back to accumulation phase prior to 1 July 2017 without having to meet the cashing regulations.

We would suggest that you should review all clients receiving death benefit income streams in light of the ATO guidelines.

 

We welcome your call to discuss client specific circumstances.

 

In the meantime please call on +61 2 4961 2788 or contact me here

 

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