The super fund pension exemption extended after death of recipient

The government has introduced changes to the law to ensure that a super fund’s investment earnings that were supporting a pension will continue to be tax exempt, following the death of the pension recipient, until the benefits are paid out of the fund – as long as the benefits are paid out as soon as practicable.

The measure will apply to the 2012/13 and later income years.

Clients with a self managed super fund (SMSF) may be aware that, if the fund pays a pension, income from the assets supporting the pension can be exempt from tax (the ‘pension exemption’). However, if the super fund pension ceases, this generally means that the pension exemption also ceases.