• Case study scenario

    Paul and Marie are married and are the trustees and members of their self-managed super fund. Marie had been ill for some time and passed away.

    Paul is the beneficiary of Marie’s super benefit and because he was Marie’s husband, he was also the dependant at the time of her death.

    Paul manages a personal investment portfolio and requested that Marie’s death benefit lump sum be paid out in three instalments to suit his financial commitments.

    Result

    Under subparagraph 6.21(2)(a)(ii) of the Superannuation Industry (Supervision) Regulations 1994 (SISR), death benefits may be cashed in the form of an interim lump sum and a final lump sum.

    Paul cannot request the payment in more than two instalments. To meet the SISR death benefit payment rules, Paul had to tailor his financial commitments around two payments.

    How this may affect you

    You need to be aware of the SISR rules for paying death benefit lump sums.

    Payments must be made in accordance with the rules to ensure the payment arrangement does not breach super law.

    If you realise that your SMSF has breached the death benefit payment rules or any other super laws, you should speak to your auditor. Some matters are most appropriately dealt with by the auditor when they do their annual audit. If this is not the case, you should contact us to discuss your options.

    See also:

      Last modified: 14 Oct 2016QC 44719