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Hi,
Have a fund with two members where one of the members died about four years ago. They have only recently got around to finalising their accounts for the 2022FY and wanting to pay out the death benefit from the member who passed away. I understand they didnt have cash to pay the benefit as the property was mostly invested in real estate which has now been sold.
Does the amount of the death benefit get calculated as at the day of death? Or does it get finalised on date of payment?
Is there a SIS qualification based on the fact that the death benefit wasnt paid out as soon as practicable ie six months per the ATO?
Hi T
SIS regulation 6.21(1) states that "Subject to subregulation (3), a member's benefits in a regulated superannuation fund must be cashed as soon as practicable after the member dies."
If it was not practical to pay out the death benefits previously then there would be no breach of SIS. If there were legal issues that prevented the sale the properties and this delayed the ability to pay out a death benefit then there would be no breach of the "soon as practicable after the member dies" rule.
The 6 month period has been the general view as to what the ATO expects in terms of paying a death benefit as being reasonable but this is not specifically covered by SIS legislation.
In terms of the value of the death benefit you should review the trust deed to determine how this is calculated. My general view is that the death benefit value is not determined at the date of death but at the date the benefit is paid.
Thanks
SMSF AAA