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Rashmi Singh

May 28, 2024

Member died last year but not restructured and payment not made

in SMSF Technical Forum

One member out of two, of the SMSF died last year in 2023 and I am auditing FY2021. The member who died has been removed as a director in 2023 but no documentation has been done yet to remove her as a member. Is it a breach of section 17A? any other breach or consequences on audit report and ACR?

Also, they have still not made the death benefit payment after a year she died because they need to finalise the financials to know the balance till date.. what would be impact on audit report and ACR as I am auditing fy 2021 and she dies in fy 2023 ?

1 comment

Comments (1)

THE AUDITORS INSTITUTE

May 28, 2024

Hi Rashmi

In relation to section 17A per section 17A(3) of SIS if a member has died their legal personal representative (LPR) can be a director of the trustee company of the Fund (or act as an individual trustee). If the LPR had not been appointed within 6 months of the member's death this would be a breach of section 17A(3). The 6 month rule is in section 17(4).

In relation to paying a death benefit 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 promptly pay out a death benefit then there would be no breach of SIS. If there were legal issues that prevented say the sale of 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.

A 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.

If a death benefit is not paid as soon as practicable after the member dies the section of SIS that would be qualified on is SIS Regulation 6.17 (that covers SIS Reg 6.21(1)).

Thanks

The Auditors Institute