Self-managed superannuation fund (SMSF) trustees looking to take out income protection insurance inside their funds need to be mindful of the wording contained in the Superannuation Industry Supervision (SIS) Act if they are to avoid a counterproductive outcome, an insurance specialist said. CommInsure national technical manager Peter Rushbrook said the specific part of the legislation considered problematic is Schedule 1 Item 109b. This section states: “a non-commutable income stream cashed from the regulated superannuation fund for: (b) a period not exceeding the period of incapacity from employment of the kind engaged in immediately before the temporary incapacity.”
“What happens if the client is unemployed before they go and claim? I don’t know. That says immediately before temporary incapacity so there is a potential issue here,” Rushbrook said.
In his attempts to achieve better clarity regarding the legislation, Rushbrook has sought various legal opinions, none of which produced a consistent interpretation. For example one interpretation was ‘immediately’ could mean up to 12 months before the temporary incapacity event while other views disagreed with this timeframe.
Darin Tyson-Chan, Investor Daily
To Continue go to ARTICLE