Sent: 24-08-2010 08:04:14
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Anti-detriment death benefits
As always the National Tax Liason Group Superannuation Subcommittee's minutes make fascinating reading.
The minutes for the March 2010 contain three items that discuss the practical application of the lump sum death benefit anti-detriment deduction. (I have written about this deduction several times over the years. Click here for further information about this deduction and how it works: http://www.atcbiz.com.au/r.php?r=adanusd)
One issue looked at whether a super fund can claim less than the maximum deduction payable. The ATO say it is looking at this and will release an Interpretative Decision on it at some stage.
Another issue dealt with the payment of death benefits from the commutations of a pension. This issue contains the following interesting quote:
The Australian Prudential Regulation Authority (APRA) - the regulator of all non-SMSF super funds - representative commented that they were concerned that some of the practical issues were sometimes used as an excuse for funds to not pay out anti-detriment payments. They have been encouraging funds to ask the ATO directly for advice but this appears to not be happening.
As I've said previously there are no prizes for being tax efficient.
The next question looked at how the additional death benefit could be paid. Previously the ATO have said that it must be paid out of a reserve. A key issue is how such a reserve would be funded and whether it would be worth the extra cost to administer such a reserve relative to the benefit provided.
A critical consideration is the fact that reserves are complicated and require a lot of administrative vigilence. I'm not convinced many SMSFs have this level of supervision.
Some members of the NTLG Super Committee disagree with the ATO view because they argue the source of the additional death benefit is future tax deductions.
Anyway elsewhere it says that many distributions from reserves are subject to contributions tax. This means additional death benefits paid out of a reserve might be a concessional contribution.
If the industry wants to use this provision and not have the additional amount counted as a concessional contribution, then it will need to consider going to Treasury.
Obviously any discussion is unlikely to get far during the current caretaker period! Hopefully that will be over fairly soon.
Finally please consider purchasing a copy of "A How To Book Of Self Managed Super Funds". You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
The second edition has just been released.
Two options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
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