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ATO issues warning on undated benefit payment requests

ato newstill 4 smsf
By sreporter
27 February 2023 — 1 minute read

The ATO has warned SMSF trustees against using undated documents requesting the payment of their benefits in the case of terminal illness or potential death.

Earlier this month, the ATO updated its website to provide further clarification on when benefits requested members shortly before death will be a member benefit or a death benefit.

Speaking at the SMSF Association National Conference, ATO deputy commissioner, superannuation and employer obligations Emma Rosenzweig said the new guidance clarifies the ATO’s position that if a trustee is paying benefits after a member has died, it would be “highly unusual circumstances for that not to be a death benefit”.

The updated guidance emphasises the importance of factors such as whether the trustee was aware that the member had died and whether the money was paid to the account of the member or their legal personal representative.

Ms Rosenzweig noted that the ATO has recently seen commentary about SMSFs having documents ready to go, requesting payment of their benefits, undated, in case of terminal illness or impending death.

“That is not behaviour that we condone. I know there are other commentators who have made strong comments about that potentially being a fraud,” she said.

“It also won’t change the characterisation. It still needs to be a highly unusual situation so just having those documents ready to go is not something that I recommend people do.”

Ms Rosenzweig also warned SMSF professionals and trustees against relying on private binding rulings that have been issued regarding the characterisation of benefits.

“Those edited versions of private binding rulings are published for transparency purposes and they are not a precedential database.

“They cannot be relied on and we have just recently added some additional words to some of them to make that even clearer. They are also edited so the full set of facts and the full reason is not always included in them.”

Prior to the release of the ATO’s updated guidance, it was understood that the ATO had reached a position that a benefit payment should be treated as a member benefit where the benefit payment was requested prior to death but paid after death.

SMSF Association deputy chief executive Peter Burgess said that the ATO has made it clear in the guidance that awareness about the death of the member is a factor to be considered.

“So if the trustees were aware that the person had died, then it should be dealt with as a death.”

This view appears to contradict some of the private binding rulings issued last year, he said.

“They have now added an annotation to the private binding rulings issued on this topic. There is some wording at the start that states that ‘the reasoning in this record is no longer up to date with the ATO’s current view’”.


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