Superannuation system ‘failing disabled children’
An industry association is calling upon Treasury to rectify some of the limitations impacting disabled children within the superannuation system that have arisen from the reforms to super.
Speaking at a seminar in Sydney, SMSF Association head of technical Peter Hogan said the SMSF Association is currently in discussion with Treasury and has written submissions to the government about some of the issues in the system facing disabled children.
“I think the system has failed disabled children in the sense that they are limited in the amount of assets that can be used to pay a pension, because they’re just treated like any other child,” Mr Hogan explained.
“They don’t have to wind up their pension at age 25, but the amount of capital they’re allowed to actually apply to a pension when an adult dies is still limited just as it is for other children. The difference is though that the other children don’t have to live on it for the rest of their lives.”
The other limitation, he said, is that insurance can’t be included in the assets that support a pension on the death of the parent.
“So insurance has to be paid out as a lump sum benefit to children with disabilities as well as children with no disabilities, so that strategy of having insurance inside superannuation to fund a decent income stream for disabled children also doesn’t work under this new regime as well and we think it should,” he said.
“Just as structured settlements should be excluded from the transfer balance cap regime, we think these arrangements for disabled children should be too. So that’s something that we’re talking to Treasury about at the moment.”
Mr Hogan noted that while there are other options, they tend to be more complex.
“You can direct [the money] to an estate, you can set up disability trusts through the estate, or testamentary trusts through the estate, or whatever you think is appropriate for that particular child and do it that way. There are alternatives, but they’re just a bit more convoluted.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.