Practical Compliance Guideline (PCG) 2017/6 Superannuation reform: commutation of a death benefit income stream before 1 July 2017 was released by the ATO this afternoon, as foreshadowed by SMSF Adviser last week.
You can access the guidance in full here.
While the ATO’s position is that a death benefit income stream can’t be commuted and moved back to accumulation phase under the existing law, it has acknowledged uncertainty about this issue and the evolution of the practice over time.
The PCG notes that the ATO will not focus compliance activities on instances under the existing law where an income stream has been commuted and placed back into accumulation phase, if the income stream had ceased to be a death benefit income stream and was a member benefit income stream for income tax purposes.
However, this approach will not continue after the new law comes into effect on 1 July. Under those provisions, a death benefit income stream cannot be commuted and placed back into an accumulation phase.
“This practical compliance guideline is a result of our ongoing engagement with the superannuation industry and addresses in a practical way concerns that industry have raised with us about practices and uncertainty that have evolved over time in relation to the commutation of death benefit income streams leading up to the implementation of the super changes on 1 July,” an ATO spokesperson told SMSF Adviser.