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Hi,
I have been asked if a member withdrawal should be treated as a member lump sum withdrawal or death benefit.
member had a serious accident & because of her injuries would result in her being quadriplegic so elected to have no further life prolonging treatment. she made this decision herself & the medical professionals accepted this, so I am satisfied she knew what she wanted in relation to her pension.
Member requested her entire balance be withdrawn & was documented in minutes signed by her ePoA on 14/10/2023, the trustees also have a voice recording of the member making this request. The first withdrawal was made on 16/10/2023. Shares were required to be sold to fund the payment of the remaining balance. Shares were sold on 18/10/2023 & final payment made on 23/10/2023.
However, the member died on 20/10/2023. Is the final payment on 23/10/2023 a member benefit or is it a death benefit?
Hi Lacey
The ATO has information on this at their website at:
https://www.ato.gov.au/Super/Self-managed-super-funds/Paying-benefits/Death-of-a-member/#Deathbenefitormemberbenefit
Your example looks very similar to the example they use in their article. In that example they treat the benefit paid after death as a death benefit. It is assumed that when the payment was made they knew that the member had passed away and is therefore it is treated as a death benefit.
The trustee can apply for a private ruling.
The ATO in their article also states that:
"If a member requested an amount to be paid from their fund before they died, but died before they received it, it may be a member benefit in some limited cases. This is determined by the facts and circumstances surrounding the payment.
A trustee of a regulated super fund can only pay super benefits according to the governing rules of the fund, including the:
fund’s trust deed
relevant legislation.
The governing rules set out when benefits can be paid and who they can be paid to, including after a member’s death. The governing rules of the fund must be read carefully to determine a member’s benefit entitlements in the event of death.
At the time of payment, the trustee must assess whether it is a member or death benefit based on the facts known at the time, including:
terms of the request from the member
terms of the trust deed and any other governing rules
knowledge at the time the payment is made (including whether they are aware that the member has died)
the entity that the payment is being paid to
circumstances and timing of the payment
whether the payment is made because of and in line with the request made by the member."
Thanks
The Auditors Institute