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Super Newsletter
ATO Update: SMSF Trustees No Longer Bound by Six-Month Death Benefit Timeline The Australian Taxation Office (ATO) has made an important change that affects how and when death benefits must be paid from a self-managed super fund (SMSF). This update gives trustees more time and flexibility, especially during the difficult period after losing a loved one.
What Was the Old Rule? Until recently, the ATO required SMSF trustees to pay death benefits within six months of a member’s demise. While the legal requirement is “as soon as practicable”, six-months was the previous guidance issued by the ATO as the compliance benchmark for cashing of death benefits. This timeframe often placed undue pressure on trustees, particularly where navigating legal processes like probate (which can be protracted), and dealing with the sale of fund assets.
As a result, some SMSFs were deemed to have breached this compliance obligations simply because these complex tasks couldn’t be completed within the six-month window.
What Has Changed? The ATO has now withdrawn the previous sixmonth guideline for paying death benefits from an SMSF. While trustees are still required to make payments “as soon as practicable,” there is no longer a fixed timeframe. This shift acknowledges the complexities involved in managing a deceased member’s estate and provides trustees with more flexibility during what is often a challenging period. The change also aligns with tax law reforms introduced in 2017, which eliminated certain financial incentives for making rapid death benefit payments.