Compliance & Regulation

Government moves to fix legal anomalies

Government moves to fix inconsistencies in super legislation.

The federal government has announced it will be amending the current superannuation legislation to correct a few irregularities that have led to poor and inconsistent outcomes for SMSF trustees.

One of the changes will involve correcting the way death benefit rollovers that include life insurance proceeds are treated for tax purposes.

Speaking at a recent industry event, Assistant Treasurer Stuart Robert acknowledged: “There actually is an anomaly here in the tax treatment of the death benefits taken out of super and it’s out of line with policy that death benefits are tax-free for dependants.

“This measure will ensure that death benefit lump sums remain tax-free for dependants even if rolled over into the superannuation system.”

Robert also declared the government will be looking to modify current laws to provide a permanent solution with regard to the transfer balance account treatment for individuals who have commuted a market-linked pension and commenced a new pension arrangement in its place.

“We’re moving to fix an error in the way market-linked pensions are valued under the transfer balance cap when they are commuted or rolled over, resulting in a nil debit,” he said.

“A nil debit is an issue because it doesn’t accurately reflect the individual’s transfer [balance] cap and may lead to an individual inadvertently breaching the transfer [balance] cap.

“Whilst the ATO has issued a bunch of guidance to self-managed super funds and their approach to compliance, the government is committed to finding a more permanent way to correct this error.”

He added the government would also be looking to amend the law to maintain the treatment of market-linked pensions under the transfer balance cap rules where they have been rolled over as a result of successive fund transfer or merger and acquisition activity.

“Market-linked pensions rolled over or commenced after 1 July last year are not treated as capped defined benefit income streams under the transfer balance cap,” he said.

“This measure will ensure that new market-linked pensions that commence because of a successive fund rollover or M&A activity in some way will continue to be treated as a capped defined benefit under that transfer balance cap.

“Superannuants should not be disadvantaged because of choices not made by them, but made by their fund.”


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