Without doubt, the laws surrounding Superannuation have numerous grey areas, and even after a couple of decades there continues to be debate over many aspects.
In July, the Australian Tax Office (ATO) released its view on when a superannuation income stream (a pension) commences and ceases. It would seem a fairly simple topic, but thanks to Capital Gains Tax and the tax free environment most pensions live in, it is now a hotly contested issue.
In its simplest form - the ATO have formed the view that as soon as you die, then you no longer can be paid your pension, and it also ceases. The big kicker here will be for those individuals with assets in super they've held for a reasonable period of time. Those assets will lose their tax free status prior to being paid out to a beneficiary, and will be assessable for Capital Gains Tax. So the next generation will potentially be poorer, and the Government coffers will be a happier place.
To add insult to injury, they are also considering back dating this practice to 2007 - so if a pension has ceased and been paid out in the last 4 years, then there is some form of pain in the future in the form of administrative burden and additional tax.
Now, in defence of the Tax Office, they are merely the messengers. They can only interpret, and apply, the law that is written - they don't make the mess in the first place. At this stage this is only their preliminary view, there is room for debate, and many of the professional bodies have taken up the call.
I'll let you know what the final position is - in the meantime pop it under your hat for consideration.
Financial Planning Essentials
w: www.finplans.com.au
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