When an SMSF member passes away midway through a financial year, the minimum pension payments for that year may not need to be met for the deceased person’s pension, depending on how they have nominated it to be paid out to their beneficiaries, according to Accurium.
Speaking in a recent webinar, Accurium general manager Doug McBirnie said that following the passing of an SMSF member, it was still possible to claim exempt current pension income on the deceased member’s pension for the financial year in which they had passed away despite the fact that the minimum payments may not have been met before they died.
“If it’s non-reversionary, there is no requirement to make a pension payment in that year — the ATO is happy that the ECPI can continue until the death benefits are paid out, as long as they are paid out as soon as practicable,” Mr McBirnie said.
“If the pension is reversionary, the spouse will take the pension, and in that case, if they have withdrawn the minimum pension during the year they can still claim ECPI.”
Accurium technical services manager Melanie Dunn said it was important to note that if the deceased member had opted for their pension to be reversionary on death, the minimum payments still needed to be met for the financial year in which they had passed away.
“The ability to not pay the pension payment is only where the pension is not automatically reversionary,” she said.
“Where it is reversionary, you must pay a minimum payment in the year, and if the client has not made the minimum payment, the income stream would not have met the minimum standards.”
However, Ms Dunn said the death of the member would not affect the amount that needed to be paid out of the pension during the year of the member’s passing.
“It’s based on the same minimum pension payment calculated back at 1 July — it doesn’t need to be pro-rated or anything like that, it’s the same minimum payment calculated on the income stream at the beginning of the year,” she said.
Source: SMSF Adviser