What about minimum pensions on death

16 June 2014
Comments Comments Off on What about minimum pensions on death
16 June 2014, Comments Comments Off on What about minimum pensions on death

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.

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