Sent: 02-09-2010 08:03:04
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Reversionary Beneficiaries vs Binding Nominations
The minutes for the March 2010 meeting of the National Tax Liaison Group Super Technical Committee's contain a very interesting item about reversionary beneficiaries and nominated beneficiaries in the context of pensions.
The question asked of the ATO can be pretty well summarised as, "Who gets access to the loot first?"
It's a really good question and no doubt there would be lots of different opinions in the super industry about what is the better view.
The ATO make the following comment:
There are no SIS Act or SISR [ie the SIS Act's regulations] provisions that are relevant to determining which nomination an SMSF trustee is to give precedence where a deceased pension member had both a valid reversionary nomination and a valid BDBN in existence at the same time of the member's death.
While section 59 of the SIS Act and Regulation 6.17A of the SISR place restrictions on superannuation entity trustees accepting BDBNs from a member, as explained in SMSF Determination SMSFD 2008/3 the Commissioner is of the view that those provisions do not have any application to SMSFs. It must also be remembered that section 59 of the SIS Act and regulation 6.17A of the SISR are necessary because of the general trust law principle that beneficiaries cannot direct trustees in the performance of their trust.
If the governing rules of a SMSF authorise a death benefit nomination, the trustee must follow the fund's rules and the general trust law and any other legislation which may be relevant.
Notwithstanding those observations, the ATO's view is that a pension that is a genuine reversionary pension, that is, one which under the terms and conditions established at the commencement of the pension reverts to a nominated (or determinable) beneficiary must be paid to the reversioner. It is only where a trustee may exercise its discretion as which beneficiary is paid the deceased member's benefits and/or the form in which the benefits are payable that a death benefit nomination is relevant.
This is a very clever response. It shows yet again the importance of the wording of a super fund's trust deed.
It also indirectly shows, yet again, the concern most people should have about relying on general compliance and catch-all clauses to run their super fund in between trust deed upgrades.
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
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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