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Super and estate planning

Rollovers of super death benefits

Section: 14.8

From 1 July 2017, the taxation definition of a 'rollover superannuation benefit' was amended to allow a superannuation lump sum death benefit to be rolled over where the beneficiary of a deceased member's superannuation interest is a dependant eligible to receive a death benefit income stream.

This change allows an eligible beneficiary to:

  • roll over a death benefit entitlement to another superannuation fund for the commencement of a death benefit income stream
  • commute and roll over an existing death benefit income stream to commence a new death benefit income stream.

It is important to note that due to the requirement for death benefits to remain cashed, any death benefit that is rolled over must be immediately used to commence a death benefit income stream. Rolled over death benefits cannot be left in accumulation phase or mixed with the beneficiary's other superannuation benefits.

Exercise caution before recommending death benefit rollovers

In certain situations, legislative changes to allow super death benefits to be rolled over from 1 July 2017 may trigger tax liabilities upon rollover. At the time of writing, the Government had released exposure draft legislation to correct this unintended consequence of the 2017 superannuation reforms. However, until this correction becomes law, planners considering recommending a member to roll over a death benefit, including commuting and rolling over a death benefit income stream, should therefore exercise caution - otherwise, the member may risk incurring significant unexpected tax liabilities.

Last modified: Wednesday, July 24, 2019