Tax Office Draft Pension Ruling Overturned

Tax Office Draft Pension Ruling Overturned

1 December 2012

New pension rules that could save spouses and children thousands of dollars in taxes are the result of the Government overturning a draft ruling made last year by the Australian Taxation Office (ATO). 

Superannuation Minister Bill Shorten announced that the Government proposes to amend the law so that the pension of a person who dies will only cease to be a pension when all the death benefits are paid to beneficiaries. 

Effectively, this means a person’s savings will remain in pension phase after they die until all the assets have been transferred or sold, without being subject to capital gains tax or income tax. 

Assets, although tax-free in the pension phase, otherwise attract 15 % income tax and 10 % capital gains tax for investments that have been held for longer than 12 months. 

A proportion of death benefits are sometimes taxed at 16.5%. 

The SMSF Professionals Association of Australia (SPAA) welcomed the announcement as being particularly helpful for self-managed super funds with large holdings of shares or properties carrying significant amounts of unrealised gains. 

The changes will take effect from 1 July 2012. 

While the announcement is welcome and will reduce the concerns of fund member’s with regard to how their benefits will be taxed after their death, there are still a number of questions that remain unanswered. 

The Australian Financial Review – 23 October 2012 
Heffron Blog

View More