The Federal Government’s decision to change the law to ensure that death benefits that include life insurance proceeds are not subject to tax when rolled over to a new superannuation fund has been welcomed by the SMSF Association.
Announced by the Assistant Treasurer Stuart Robert in his address to the Alliance for a Fairer Superannuation System in Sydney, SMSF Association CEO John Maroney says: “The decision to correct death benefit anomalies is extremely important to those people who have been forced to wait for an amendment before being able to adequately deal with death benefit sums.
“Individuals will now have the intended legislative flexibility to keep money in the superannuation system without adverse tax results.”
This announcement was one of several important technical superannuation changes announced by the Minister, which the Association has been strongly advocating in Canberra.
Maroney says: “The move to fix the way that market-linked pensions are valued under the Transfer Balance Cap (TBC) when they are commuted or rolled over, resulting in a nil debit, is another positive for the superannuation system.
“We support the intention to have a more permanent legislative solution to ensure the value of a commuted market-linked pension is correct.
“The 1 July 2017 super changes have caused significant distress for individuals with legacy pensions and this move is a step in the right direction to simplify the superannuation system.
“These are all changes the Association has been asking the Government to adopt, with the end result being better outcomes for many people in the super system.”
The Government also announced:
- Amending the law to maintain the treatment of market‑linked pensions under the TBC where they have been rolled over because of a successor fund transfer;
- Fixing the definition of life-expectancy period for innovative income streams to account for days in a leap year;
- Providing TBC credits and debits for innovative income stream products that are paid off in instalments; and
- Fixing the valuation of defined benefit pensions under the TBC to reflect when pensions are permanently reduced.
Maroney adds that the Government should further consider unresolved technical superannuation fixes recommended in the Association’s 2018-19 Budget submission, as well as the Death Benefit Superannuation Technical Amendment submission.
The Association will also make a submission to the Government with a focus on how to simplify the superannuation system.