What is Reversionary Pension
A reversionary pension is a superannuation income stream that automatically continues to a nominated beneficiary when the original member dies. The rules around minimum pension amounts, TBAR reporting and transfer balance caps operate differently for reversionary pensions compared with standard account-based pensions.
Is There a Valid Reversionay Nomination
The reversionary nomination is usually made when the pension commences. However some deeds allow a non-reversionary pension to be converted to reversionary. Binding death benefit nominations direct how super balance is distributed but don’t create an automatic continuing pension.
Is the Reversionary Beneficiary Still Valid
Valid reversionary beneficiaries include:
- Spouse or de facto partner (including same-sex partners)
- Children under 18
- Adult children (18+) who are financially dependent on the deceased
- Adult children with a disability (any age) who meet the definition of having a disability for tax purposes
- Person in an interdependency relationship with the deceased (someone who lives with and has a close personal relationship with shared financial and domestic support)
Reversionay Pension – Minimum Pension Payment in the Year of Death
The minimum pension is calcuated for the whole year based on the age of the deceased. Partical commnutation doesn’t count as a minimum pension.
TBAR Reporting
- Don’t need to report the death of a member for TBAR purpose
- Report the credit that arises in the transfer balance account of the reversionary beneficiary
- Report 28 days after the quarter of the death
- Report the date of death of member as the effective date
- Report the value of the income stream on the day the member died
- The ATO will only apply the credit to the transfer balance account of reversionary beneficiary 12 months after the death of the orignial member
Transfer Balance Account of the Reversionary Beneficiary after 12 months
Suppose the transfer balanace account exceeds the transfer balance cap for the reversionary beneficiary, the reversionary beneficiary can either commute any pension of their own or cash out the reversionary pension. The reversionary pension can’t be commuted to accumulation.