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Super and estate planning

Compulsory cashing of benefits upon death

Section: 14.3

A member's benefits in a regulated super fund must be cashed as soon as practicable after the member dies.

'Cashed' refers to the payment of a benefit from the super system. A benefit is cashed when the beneficiary accepts the money (or in the case of lump sums only, other assets representing the benefit), banks a cheque which is subsequently honoured or receives a credit by way of an electronic transfer from a fund in payment of benefits.

Where the benefits of a deceased member of an SMSF are paid as a death benefit, the benefit cannot be transferred to the beneficiary's member account by way of journal entries in the books of the fund. Cashing necessarily involves the actual payment of the cash, assets or other consideration for the benefit of the beneficiary. See ATO ID 2002/141.

As soon as practicable
There is no legislative definition or APRA interpretation of how long 'as soon as practicable' is for the purposes of compulsory cashing of super upon death.

Requirement for death benefits to remain cashed

From 1 July 2017, where a death benefit income stream commences to be paid, the ongoing requirement for death benefits to remain 'cashed' prevents the death benefit income stream interest from:

  • Being rolled back to accumulation phase or to an income stream that is not in the retirement phase
  • Being mixed with the beneficiary's other superannuation interests 9including at or before the commencement of the income stream).

Last modified: Wednesday, July 24, 2019