The Income Tax Assessment Amendment (Superannuation Measures No 1) Regulation 2013 was registered on Mon 3.6.2013, to give effect to the Government’s 2012-13 MYEFO announcement to provide tax certainty to deceased estates, where a person has died while in receipt of a superannuation income stream.
The regulation expands the meaning of “superannuation income stream benefit” in reg 995-1.01 of the Income Tax Assessment Regulations 1997 to allow the pension earnings tax exemption for a complying super fund to continue after the death of a pension recipient until the deceased member’s benefits have been paid out as a lump sum and/or a new income stream commenced.
This continuation of the exempt current pension income (ECPI) provisions beyond the death of a member is still subject to the existing requirement for the benefits of a deceased member to be paid out of the fund “as soon as practicable” following the member’s death. The Regulation effectively allows a super fund trustees to dispose of pension assets on a tax-free basis to fund the payment of death benefits from 1 July 2012.
The Regulation also establishes an alternative method for the “proportioning rule” used to calculate the tax free and taxable components of superannuation benefits paid after the death of a person who was receiving a superannuation income stream immediately before their death. In broad terms, the new method (reg 307-125.02 of the ITA Regs) allows the tax-free proportion of that superannuation income stream to be used in calculating the tax components of those benefits.
DATE OF EFFECT: The Regulation will commence Tue 4.6.2013, and apply in relation to the 2012-13 and later income years. The alternative proportioning rule will apply to a superannuation benefit paid on or after this commencement date.
[LTN 105, 3/6/13]