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I am auditing a fund where the only member died, and was in pension phase, and does not have a reversionary pension in place.
Does the minimum pension need to be met that financial year?
Does the fund's income remain tax-free? If so, for how long?
If if takes longer than 6 months for death benefits to be paid, is there a particular reportable section in the audit report/ACR to consider?
Thank you.
Hi Jason
In your example as it is a non reversionary pension the minimum pension payment does not need to have been paid in the year of death. If it was a reversionary pension the minimum pension payment must still be made in the year of death.
Yes the Fund's investment income re the deceased's pension account remains tax free until a lump sum benefit is paid or a new death benefit pension is commenced.
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.
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.
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