Super Newsletter
ATO Update: SMSF Trustees No Longer Bound by Six-Month Death Benefit Timeline
The Australian Taxation Office (ATO) has made an important change that affects how and when death benefits must be paid from a self-managed super fund (SMSF). This update gives trustees more time and flexibility, especially during the difficult period after losing a loved one.
What Was the Old Rule?
Until recently, the ATO required SMSF trustees to pay death benefits within six months of a member’s demise. While the legal requirement is “as soon as practicable”, six-months was the previous guidance issued by the ATO as the compliance benchmark for cashing of death benefits
This timeframe often placed undue pressure on trustees, particularly where navigating legal processes like probate (which can be protracted), and dealing with the sale of fund assets
As a result, some SMSFs were deemed to have breached this compliance obligations simply because these complex tasks couldn’t be completed within the six-month window.
What Has Changed?
The ATO has now withdrawn the previous sixmonth guideline for paying death benefits from an SMSF While trustees are still required to make payments “as soon as practicable,” there is no longer a fixed timeframe. This shift acknowledges the complexities involved in managing a deceased member’s estate and provides trustees with more flexibility during what is often a challenging period.
The change also aligns with tax law reforms introduced in 2017, which eliminated certain financial incentives for making rapid death benefit payments.
What Does This Mean for You as a Trustee?
This update offers greater flexibility, but it’s important to remember that “as soon as practicable” still means acting with care and timeliness. Auditors will continue to assess whether trustees are managing death benefit payments responsibly and without unnecessary delay.
A Good Time to Review Your Estate Planning
This mention is a good reminder to check your estate planning. Would your member instructions permit trustees to make payments to your beneficiaries within a reasonable timeframe? Could the trustees be faced with a dilemma or be under a legal conflict? Make sure your SMSF documents are up to date, including your beneficiary nominations. Particularly if your family situation or financial position has changed, it might be time for a review.
Having a clear plan helps your loved ones and makes things easier during a difficult time.
ATO’s 2025 SMSF Compliance Focus: Market Valuations & Auditor Independence
For its 2025 compliance strategy, the ATO is placing increased scrutiny on two critical areas for SMSFs - accurate market valuation of assets and auditor independence. These focus areas are essential for maintaining fund integrity and avoiding regulatory breaches.
Market Valuation of
Assets
SMSF trustees are required to report all fund assets at market value when preparing financial statements each year, in accordance with regulation 8.02B of the Superannuation Industry (Supervision) Regulations 1994.
To meet this requirement, trustees must: Provide objective and supportable evidence to substantiate asset valuations. Ensure valuations are as close as possible to 30 June of the relevant financial year. Use qualified independent valuers where appropriate, especially for real property or complex assets.
Where the unlisted asset is material to the overall fund position, having an independent valuation is prudent for ensuring compliance with reporting obligations and avoiding potential tax governance concerns
Auditors are on notice to obtain sufficient evidence to verify these valuations. The ATO has published guidelines and expect compliance therewith and if not, the auditor is required to:
Modify the Audit Report to include a Part A and/or Part B breach
Lodge an Auditor Contravention Report (ACR) with the Tax Office to advise of the breach if the reporting criteria are met
If you're uncertain whether your market valuation is sufficient, please refer to the ATO valuation guidelines outlined in our June 2025 newsletter Alternatively, feel free to contact our office with any questions or concerns.
Auditor Independence
Auditor independence remains a cornerstone of SMSF compliance. The ATO requires auditors to adhere to the APES 110 Code of Ethics for Professional Accountants, which includes both independence of mind and independence in appearance.
The ATO has flagged concerns with:
In-house audits and long-standing client relationships.
Auditors receiving a large proportion of fees from one source.
Lack of documentation supporting independence assessments.
Reciprocal audit and other arrangements where independence or audit quality is compromised will be a focus for the ATO Where concerns are identified, the ATO refers matters to ASIC. In FY25 ASIC took action against 48 SMSF auditors with seven being disqualified, three suspended, fourteen being imposed with additional conditions and the cancellation of the registration of 24 other SMSF auditors.
We ensure that all auditors on our panel are independent from Pitcher Partners and free from the concerns raised by the ATO, including conflicts of interest, reciprocal arrangements, and lack of documented independence assessments.
