From 1 July 2017, super funds may no longer pay a refund of a member’s lifetime superannuation contributions tax payment into an estate and claim a tax deduction for this payment.
Anti-detriment provisions will be removed.
These anti-detriment provisions allow an income tax deduction to a complying superannuation fund, life insurer, or complying approved deposit fund that pays an increased superannuation lump sum because of the death of a member for the benefit of their spouse, former spouse or child, to compensate for income tax paid by the fund in respect of contributions made for the member during their lifetime.
Death benefits are important in the superannuation system and are referred to expressly when the superannuation’s sole purpose is defined.
Adult children are usually not considered as dependents but they are under the super laws. This means financially independent children can receive taxable super death benefits.
Tax-free super death benefits are payable to spouses, under aged children, financially dependent people or those who had an interdependency relationship with the deceased.
Note that an anti-detriment payment is an addition to the usual death benefits payable by a super fund to the deceased’s beneficiaries. The new $1.6 million transfer balance cap will also affect those receiving super death benefit pensions.
The new rule also allows for timing issues. For example, if a super fund member dies before 1 July 2017, an anti-detriment payment may still be done up to 30 June 2019. Starting 1 July 2019, no anti-detriment payments will be available for members who died before July 2017.
The aforementioned timeframe is not applicable to other death benefits, which generally have a six to 12 month timeframe, if payment of a reversionary pension tips the beneficiary over the $1.6 million general transfer balance cap.
For more information about superannuation, contact a Specialist to discuss your particular circumstances.
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Source: Super Guide