Month: October 2025

SMSF Death Benefit Checklist

Introduction:

When a member of an SMSF dies a death benefit may become payable to dependents. Also, if the deceased was an individual trustee or director of the corporate trustee a replacement may be required to ensure the fund can continue to operate and benefits are paid.

Here are some questions which may assist to ensure the correct documents are in place and decisions have been made to support the death benefit payment and the replacement of the trustee.

Depending on the client’s situation and the trust deed, there may be many more questions in addition to those below.

Notification of the Member’s death

  1. Has the trustee been notified of the death of a member or trustee?
  2. Has the trustee received a copy of the death certificate of the deceased or other official recognition of the death of the member or trustee?

Trust deed provisions

Do the governing rules of the fund, such as the fund’s trust deed, have any special requirements in relation to the death of the member or trustee?

Do the governing rules require replacement of the deceased member/trustee or member/director of the corporate trustee with the deceased’s legal personal representative (LPR) before a decision can be made about the payment of the deceased member’s death benefit?

Trustees

  1. Did the fund consist of a single member and a corporate trustee where the single member was the sole director of a corporate trustee?
  2. Did the fund have a corporate trustee and two directors who died simultaneously?
  3. Does the fund have one trustee or director of the corporate trustee who is living?
  4. If the sole director or the directors of a corporate trustee has died the company constitution may provide instructions on how the director is replaced.
  5. Did the deceased have a last will and testament which appointed an executor of their estate who can act as their legal personal representative (LPR)?
  6. If there is no will or LPR, have dependants or those who consider they have a claim to the superannuation of the deceased applied to the court for letters of administration. Has the Court granted letters of administration or is it in progress?

Death benefit powers of attorney and nominations

  1. Did the deceased grant an enduring power of attorney to a person or persons who are acting as the LPR of the deceased?
  2. Did the deceased make a death benefit nomination prior to their death?
  3. Is the death benefit nomination valid in terms of the fund’s governing rules and the law?
  4. Was the death benefit nomination binding or non-binding on the trustee?
  5. If the death benefit nomination is binding, the trustee is obliged to distribute benefits as instructed by the deceased.
  6. If the death benefit nomination was non-binding the trustee may use discretion to distribute benefits as provided in the nomination. However, they are not obliged to distribute benefits as provided in the non-binding nomination.

Payment of death benefit lump sums and pensions

  1. Have dependants of the deceased as at the date of the member’s death been identified for purposes of the SIS Act and Regulations?
  2. Was the deceased in receipt of a pension at the time of their death which provided a reversion to a dependant?
  3. Did the deceased make a valid reversionary pension nomination in accordance with the governing rules of the fund?
  4. Has the trustee made a decision concerning the distribution of death benefits to the dependants of the deceased or to their estate via their LPR?
  5. Are the member’s death benefits required to be paid as lump sums or pensions?
  6. Has more than an interim and final payment been made to the dependant as a lump sum?
  7. Was a pension payable to the surviving spouse if the deceased and surviving spouse were both under age 60 at the time of the member’s death? If so, tax is payable on taxable component of the pension until the surviving spouse is age 60.
  8. If pensions were payable to children of the deceased who are under 18 has the child’s LPR or guardian been identified to receive the payment on the child’s behalf?
  9. Have lump sums payable to the executor of the member’s estate been distributed in accordance with the will of the deceased?

Have trustee minutes and resolutions been made concerning the member’s death, appointment of trustee and payment of benefits to dependants or the member’s estate?

Has the trustee received confirmation of receipt of death benefit or commencement of a death benefit pension by the dependant and/or the estate of the deceased, as relevant?

Have the trustees notified the ATO concerning the amount of tax to be paid in respect of the taxable component of any death benefit lump sum paid to persons who are not death benefit dependants, for example, adult children of the deceased?

Cloudoffis makes preparation, approvals and compliance easy with AI-powered workpapers. As Australia’s leading SaaS provider in the SMSF industry, we bring over 9 years of unparalleled experience.

Pioneers in our field, we take pride in supporting the accounting and auditing community to streamline their workflows and work more efficiently through SMSF Sorted, SMSF Auditomation and Tax Sorted.

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Graeme’s Super News - October Edition

Read the latest updates from Graeme Colley, a respected educator, policy advisor, and technical expert with over 30 years' experience in taxation and superannuation.

Graeme’s Super News – October Edition

Read the latest updates from Graeme Colley, a respected educator, policy advisor, and technical expert with over 30 years’ experience in taxation and superannuation.

Update on Division 296

Division 296 amends the income tax law to introduce an additional tax of up to 15% on the increase in a person’s Total Superannuation Balance for the year on balances above $3 million. It was intended to take effect from 1 July 2025.

Based on recent media reports the government has paused progression of the tax. If the legislation does make it into to parliament it may not be in the same form as the original bill which lapsed on 21 July 2025. It may be better to wait until we see whether the legislation will go ahead and, if it does, whether any changes are made to the lapsed bills.

It is rumoured that the $3 million threshold may be indexed which may relieve one of the main issues with the legislation. However, the member’s total superannuation balance which is used to determine the threshold may still include unrealised capital gains in the calculation.

At the moment it’s just wait and see what the government proposes to do.

Amendments to superannuation contributions ruling finalised

Taxation Ruling TR 2010/1 Income tax: superannuation contributions has been amended by TR 2010/1A4 to provide the ATO’s view of the link between the non-arm’s length income provisions in section 295-550 of the ITAA ’97 and superannuation contributions. The amendments are relevant for trustees of super funds, particularly SMSFs, in determining whether the non-arm’s length income rules apply when making in specie contributions.

The amendments to TR 2010/1 also cover value shifting arrangements to exclude those occurring from 28 November 2024. But it covers the ATO’s approach to arrangements entered into prior to that date in Appendix 2 of the Ruling.

In relation to determining whether personal contributions are deductible the amended ruling covers the removal of the maximum earnings test which has applied since 1 July 2017.

Amended non-arm’s length income/expenditure ruling finalised

Law Companion Ruling LCR 2021/2 has been amended by LCR 2021/2A3 to clarify how amendments to section 295-550 of the ITAA ‘97 operate in a scheme where the parties do not deal with each other at arm’s length. It applies where the trustee of small complying superannuation funds, such as an SMSF or SAF incurs non-arm’s length expenditure (or does not incur relevant expenditure) in gaining or producing the fund’s ordinary or statutory income.

The revised ruling provides clarity to a range of NALI/E issues including the difference between services provided as a trustee and in a professional capacity.

ATO SMSF Stats for the June Quarter 2025

The latest SMSF quarterly statistics as at June 2025 were released in early September and highlights the continued growth of SMSFs. The ATO statistics show that there are 653,062 SMSFs which have a total of 1,203,127 members.

During the 2024/25 financial year there was an increase of 38,449 funds, which was a substantial increase over each of the previous three years. Nearly two-thirds of the increase in SMSF memberships has come from the younger age groups. Although over 50% of members are in the 60+ age group.

SMSFs now hold over $1 trillion in assets with the largest asset classes being listed shares and cash and term deposits.

The ATO’s SMSF quarterly statistical reports is available from the ATO website at June 2025 ATO SMSF statistics

Government Audit Office Review of SMSFs

The Australian National Audit Office (ANAO), has listed an audit of the ATO’s regulation of SMSFs for the 2025/26 financial year as well as a follow up audit of employer compliance with Superannuation Guarantee. The ANAO last examined the ATO’s management of SMSFs in 2007, and Superannuation Guarantee non-compliance in 2022.

The review of employer compliance with the Superannuation Guarantee requirements, compliments the introduction of the payday super which is due to commence on 1 July 2026.

Cancellation of Auditor Contravention Reports

If you are an SMSF auditor, the ATO must be notified if a reportable contravention under the SIS Act has occurred, is occurring or may occur. The contravention is made by lodging an Auditor Contravention Report (ACR) within 28 days of completing the audit.

However, if the ACR was sent to the ATO because of a genuine error then it can be cancelled. Genuine errors include:

  • lodging under the wrong fund ABN
  • providing incorrect information about the contravention based on the evidence you had in your possession at the time of reporting the contravention to us.

If the information received after lodging the ACR shows that the reported contravention was incorrect, didn’t occur, or has been rectified, a revised ACR should be lodged with the ATO. This can be done by using the ATO’s Online services for business to request a cancellation. If the ATO considers there are valid reasons for cancellation it will reply within 28 days of the request.

Issues with accountants’ wholesale investor certificates

In late June 2025 the Australian Financial Complaints Authority (AFCA) handed down a decision Case number: 12-00-1080719 concerning an SMSF which had invested in Contracts for Difference (CFDs) on the basis that it was a wholesale investor for purposes of the Corporations Act 2001.

AFCA came to the conclusion that the SMSF was a retail client because the financial services provided by the financial firms involved related to a beneficial interest in the SMSF, which was a superannuation product, and the SMSF held less than $10 million in net assets as required under the Corporations Act 2001.

The decision in this case changed a longstanding understanding on the basis of an ASIC Media Release 14-191MR Statement on wholesale and retail investors and SMSFs | ASIC . It indicated that if a superannuation fund held less than $10 million in net assets that ASIC would no action if the advice provider determined that the trustee was a wholesale client based on the general net assets test of $2.5 million applying to the individual. As a general rule this was taken to assume that the SMSF could be treated as a wholesale client.

However, in its decision AFCA pointed out that the Media Release 14-191MR is not a definitive statement by ASIC that the general wholesale client test applies to SMSF trustees in relation to financial services these trustees receive. In effect, the release relates to ASIC not taking action in the circumstances indicated in the Media Release.

The AFCA decision was recently confirmed by their lead ombudsman, Shail Singh, and in the AFCA newsletter dated 19 June 2025 that the Corporations Act treats everyone as a retail investor unless you fall into a category of wholesale.

Qualified accountants who have been asked to provide wholesale investor certificate for purposes of Chapter 7 of the Corporations Act must understand when it can be given for an SMSF and that the net value of the fund’s assets are calculated correctly.



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An update on Division 296 by Graeme Colley

Graeme Colley, who is a well-known expert in SMSFs and the Cloudoffis Independent Consultant, has provided an update on the latest developments for Div 296. 

What’s changed?

On 13 October, the government announced changes to the Div 296 tax proposal, which taxes increases in a member’s superannuation balance above $3 million.  The original proposal was placed under significant pressure by those who were impacted for many reasons.   These included no indexation of the $3 million threshold and the taxation of unrealised capital gains.  

The proposed changes still maintain the overall design of the legislation, which requires the tax to be paid by the member.  However, there are changes to the calculation of the amount to be taxed by excluding unrealised capital gains and introducing two thresholds at which the tax is payable.

The main changes to Div 296 announced by the Treasurer are:

Introduction of two thresholds

Div 296 tax will apply on balances above $3 million, and a further tax will apply on balances above $3 million.

Thresholds indexed

The two thresholds will be indexed in line with increases in CPI.  The $3 million cap will be indexed in increments of $150,000, and the $10 million threshold indexed in increments of $500,000.

Tax on ‘earnings’

The tax rate on the ‘earnings’ for balances above $3 million will be an extra 15% and a further tax of 10% applies if the member’s balance is greater than $10 million.  This means that a member who is wholly in the accumulation phase with a balance of between $3 million and $10 million will pay tax equal to 30% of their adjusted ‘income’, and those with a balance of more than $10 million will pay an additional amount equal to 40% of their adjusted ‘income’.

Calculation of the member’s adjusted ‘earnings’ for Div 296 purposes.

The calculation of a member’s total superannuation balance for Div 296 purposes will be adjusted for contributions, pension payments and other amounts.  The announced changes will now exclude unrealised capital gains, which was a controversial feature of the original proposal. 

If a member has a total amount in super greater than a threshold, the ATO contacts the relevant fund or funds to get further information so the adjustments can be made.  Any ‘earnings’ adjustment will be based on the fund’s taxable income.

Change in commencement date of Div 296

The proposed commencement date of the new tax is now 1 July 2026.  This means that Div 296 assessments will not be sent out to members until sometime in the 2027-28 financial year at the earliest.

Don’t forget that the government’s announcement on 13 October is not law.  There may be further changes when the legislation goes through the parliament, expected early in the new year.  As Div 296 is proposed to commence on 1 July 2026 don’t jump at shadows and make ad hoc decisions until the exact wording of the legislation is known and passed.

Further information on the government’s changes can be located on the Treasurer’s website and the Treasury website.

Want to ask Graeme about this?

Graeme will provide a detailed overview of the government’s Div 296 announcement at our Q&A webinar on 29 October

You can register for the webinar here. 

 

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ATO SMSF Stats for the June Quarter 2025

ATO SMSF Stats for the June Quarter 2025

The latest SMSF quarterly statistics as at June 2025 were released in early September and highlight the continued growth of SMSFs. The ATO statistics show that there are 653,062 SMSFs which have a total of 1,203,127 members.

During the 2024/25 financial year, there was an increase of 38,449 funds, which was a substantial increase over each of the previous three years. Nearly two-thirds of the increase in SMSF memberships has come from the younger age groups. Although over 50% of members are in the 60+ age group.

SMSFs now hold over $1 trillion in assets, with the largest asset classes being listed shares, cash and term deposits.

The ATO’s SMSF quarterly statistical reports is available from the ATO website at
June 2025 ATO SMSF statistics

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The latest update on Division 296

What is Division 296?

Division 296 refers to a section of the Australian Income Tax Assessment Act 1997 (ITAA 1997). It primarily deals with superannuation and the taxation of certain superannuation-related amounts.

Who does it affect?

  • Individuals with total superannuation balances over $3 million, starting from the 2025–26 financial year.
  • The extra tax applies only to the earnings on the portion of the balance above $3 million, not on the entire balance.

An update

Division 296 amends the income tax law to introduce an additional tax of up to 15% on the increase in a person’s Total Superannuation Balance for the year on balances above $3 million. It was intended to take effect from 1 July 2025.

Based on recent media reports, the government has paused the progression of the tax. If the legislation does make it into parliament, it may not be in the same form as the original bill, which lapsed on 21 July 2025. It may be better to wait until we see whether the legislation will go ahead and, if it does, whether any changes are made to the lapsed bills.

It is rumoured that the $3 million threshold may be indexed, which may relieve one of the main issues with the legislation. However, the member’s total superannuation balance, which is used to determine the threshold, may still include unrealised capital gains in the calculation. At the moment, it’s just wait and see what the government proposes to do.

To keep up to date, keep an eye on the Cloudoffis blog and also these sources below:

https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/better-targeted-superannuation-concessions?utm_source=chatgpt.com

https://treasury.gov.au/sites/default/files/2023-09/c2023-443986-em.pdf

https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/superannuation-tax-breaks

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