This means that where a client has made an inadvertent breach, it won’t automatically require the payment of the death benefit lump sum out of the system.

The ATO has since updated its guidance to clarify that it only relates to reversionary pensions only.

Accurium SMSF technical services manager Melanie Dunn said this update to the guidance may have actually resulted in further confusion.

“The original guidance, in our view, was relevant to both a new death benefit income stream taken by an eligible beneficiary and a reversionary income stream that is paid to a beneficiary upon death of the original pensioner,” Ms Dunn explained in an online blog.

“Both types of death benefit income stream are subject to the death benefit cashing requirements, and both types of income streams are subject to annual minimum pension payment requirements.”

A minimum pension payment must be paid on both types of income streams in the year of death, unless the new death benefit income stream commenced in June, she said, and in all future years in order for the income stream to meet the Superannuation Industry (Supervision) Regulations 1994 (SISR) minimum pension standards.

“As such, the change to the ATO’s guidance to say it relates only to reversionary income streams has us confused,” Ms Dunn said.

“Does this change mean a death benefit income stream that is not a reversionary pension must be cashed as a lump sum if it fails to meet the pension standards in a year?”

It is also unclear, she said, whether the guidance only applies in the year of death where the reversionary income stream fails to meet the minimum pension standards, and not for a failure in any subsequent years.

“This update to say the guidance applies only to reversionary income streams raises more questions that will now need to be addressed by the ATO in order to provide the industry with a clear understanding of the implications for failing to meet the pension standards on a death benefit income stream,” she said.