The new Draft Ruling from the ATO that will require a pension account to automatically revert back to the accumulation phase upon the death of a member is consistent with their poor policy on excess contributions.
It is not uncommon for pension accounts to hold long term assets that are very pregnant with unrealised capital gains. The new Draft Ruling requires this asset to be sold as if in the Accumulation phase when a pensioner dies assuming there is no reversionary pensioner, consequently slugging the fund with tax and reducing the proceeds payable to the estate.
If introduced it highlights the importance of ongoing strategic maintenance for each asset in the fund as a pensioner progresses throughout their retirement because the impact of this to an estate could be tens if not hundreds of thousands of dollars.
