A Federal Government proposal that would amend the rules applying to superannuation to allow terminally ill people to gain early access to superannuation benefits on a tax-free basis has gained a positive response in the financial services industry.
The proposal, if adopted, would have significant implications for financial advisers dealing with clients deemed to be suffering a terminal illness.
The proposal, outlined in a Treasury consultation paper, has already earned the qualified support of the Association of Superannuation Funds of Australia (ASFA).
However, in a submission to the Treasury, ASFA has warned that any changes may require amendments to be made to Product Disclosure Statements and pointed out that the ability of terminally ill members to access a benefit may depend on which fund they are a member of.
It said that without legislative direction, the accessible amount of a member’s benefit would be determined by the fund trustee.
The submission said trustees would need to carefully consider the implications of paying out a member’s total entitlement if this were to result in the member’s insurance cover lapsing prior to their death due to insufficient money to meet ongoing premiums.
