Technical expert flags key pension reporting rules
While a member’s death will not need to be reported for transfer balance cap purposes, there are important reporting obligations for the surviving member where the pension is reversionary, says a technical expert.
Speaking in a webinar, SMSF Academy director Aaron Dunn said where a member is dying and there is a reversionary income stream, there will be no need to report the member’s death through the new transfer balance account reporting (TBAR).
However, for the recipient receiving the reversionary income stream, it is very important to determine when the 12-month period from the date of death is, he said, as the income stream will need to be reported from that point.
“The original member's transfer balance account will obviously cease when they are no longer here, and the ATO is going to obtain this information from births, deaths and marriages,” said Mr Dunn.
“So there is not going to be any real obligation in respect to the death benefit, but if it is reversionary, we are going to need to make sure that we've locked in the 12 month reporting time-frame for auto-reversionary income streams from that date of death, to ensure that we comply with the surviving member's obligations around that income stream.”
In relation to family law splits where there is a capped defined benefit income stream, Mr Dunn explained that in essence the benefit has to continue to be paid to the specific individual that's entitled to that income stream.
“Here the member spouse will retain complete ownership of the interest, but only a portion of each repayment that they've been receiving will be directed across,” he said.
“The member or non-member is required to report this information to the ATO.”