SPAA CEO Andrea Slattery says: “This decision will allow the pension earnings tax exemption to continue after the death of a pensioner until the deceased member’s benefit has been paid out of the fund. This is excellent news for the thousands of SMSFs in the pension phase which could face significant capital gains tax bills on the payment of death benefits. 

“SPAA believed the previous ruling was unjust, and we have been assertive, with other sections of the industry over the past 12 months, to have the law amended. Today’s announcement is warmly welcomed and we thank the Government for taking the time to listen to genuine concerns across the superannuation industry.” 

However, Mrs Slattery says some aspects of the Australian Taxation Office draft ruling TR 2011/D3 which was handed down last year, still need to be clarified. 

“This draft identified a number of other events that might result in the pension exemption ceasing and re-starting for tax purposes.” 

“In these other instances, SPAA assumes the ATO’s interpretation of the law published in the draft ruling will probably  stay in place.  If this is the case, then there are still a number of related technical issues that remain outstanding that of particular importance for the SMSF sector and superannuation sector as a whole.” 

Mrs Slattery also raised the issue as to the timing of the implementation of this amendment. 

“The announcement says these changes will apply from the 2012-13 financial year. But what about funds that are impacted pre 2012-13 as a result of the ATO’s draft ruling – do we assume the ATO’s view prevails? 

“SPAA is aware of a number of SMSF administrators who started taxing death benefits in accordance with the ATO’s interpretation when it first became known a few years back. The answer is uncertain, however, presumably these funds will now be entitled to a tax refund.” 

On a disappointing note, SPAA says the decision to increase the SMSF levy, which equates to around $32 million a year in extra revenue, seems difficult to justify. 

“It has been sold on the basis of cost recovery, but further details of the increased cost to SMSFs are required from the Government to support such a substantial increase.” 

“In addition, the change in the collection of the levy may have important implications for new SMSFs if they have insufficient funds to pay the levy at the time the fund is established,” she says.

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