George and Mabel are members of a SMSF.
George is aged 65 and has an account based pension.
Mabel is aged 57, still working and has a TRIS.
Both members have reversionary pensions with one another as reversionary beneficiaries.
If George dies, his benefits would revert to Mabel and stay in the SMSF.
Once the benefits are reverted
- For the remainder of the year the minimum pension would remain at George’s minimum, not Mabel’s.
- If Mabel still had to withdraw some money to meet the minimum, would the taxable portion of the pension be assessable in her own name?
- Would the pension remain a ABP, meaning she could withdraw up to the balance of the member benefits?
- Subsequently, for the next financial year, would the pension revert to a TRIS?
- Would the taxable portion of the pension be assessable in her personal name?
- Would she be subject to a 10% maximum?
What happens next?
When George dies the pension becomes Mabel's so she carries it on as an accounts based pension.
As it is Mabel's pension, a minimum for the pension based on the period that she holds it for the remainder of the year is required.
George's minimum is pro-rated to the date of death.
In terms of taxation if the deceased pension member was over age 60 and in receipt of a tax free income on the taxable component then, the reversionary dependent beneficiary will also receive tax free pension income.
George was age 65, and was in receipt of a tax free pension. Therefore the pension is still tax free for the reversionary beneficiary.
However if Mabel rolls back the pension to the accumulation account it will be unrestricted non-preserve benefits and may be taken at any time.
In fact if Mabel draws out within a period of six months from the date of probate it will be tax free in her hands.