Partner’s death raises issues for super payouts

WE are having some difficulty understanding the cashing-out rules in the event of the death of a spouse, where both have $1.6 million in pension accounts together with substantial accumulation accounts.

What has to be ‘‘cashed out’’ and must the amount be in cash, which would require our fund to sell shares or property? Or can it be a paper transfer of shares or property to the surviving spouse’s non-superannuation personal account?

The bottom line is that under the new provisions, the maximum amount in superannuation that can be transferred from the deceased to the super account of a beneficiary is $1.6 million.

If the superannuation account of the deceased is in excess of this, the money is simply paid to the beneficiary, who cannot then contribute the money to their own superannuation account.

If the beneficiary is a spouse, or a dependent, the entire sum would be tax-free.

If they are a non-dependent there is a death tax of 15 per cent plus the Medicare levy on the taxable component. These payments can be made in specie or in cash. I HAVEN’T been able to find any reference to what the position for people like me would be if Labor is elected and their franking credits policy is to get through.

I was on a part pension until it was taken away from me by the current government due to the changes in the asset test.

I now have a Pensioner Concession Card but no government pension. I understand that there are about 100,000 people in my position. Would Labor’s pensioner guarantee cover us, or would we be hit with a double whammy courtesy of both major parties?

Keep in mind that we are a long way from that situation yet. First, Labor has to be elected, and then their proposed legislation has to pass both Houses of Parliament.

But they have already stated that only pensioners and part pensioners will be able to retain the ability to get a refund of franking credits, so I assume the double whammy you fear will happen if the legislation does pass.

LABOR’S proposal, if it gets into power, is to disallow the payment of cash for franking credits to investors who pay no income tax. This is of concern.

However, I have heard that there is the possibility that existing securities could be grandfathered until they are replaced over the next seven years. What does that mean?

I have not heard of this proposal, but I suppose it would mean that investors would be able to claim excess franking credits on existing shares but not ones that had been more recently purchased. I cannot imagine it being legislated, in view of the immense complexity it would cause.

‘They have already stated that only pensioners and part pensioners will be able to retain the ability to get a refund of franking credits’