The ATO have issued SMSF News Alert 2018/3: advice for funds where members have a market-linked pension. The ATO advise:
They are aware of circumstances where an individual was receiving a life expectancy or market-linked pension just before 1 July 2017, which was a capped defined benefit income stream; then commuted the pension on or after 1 July 2017 and the transfer balance debit, worked out under the special value rule in Income Tax Assessment Act 1997 subsection 294-145(1), is nil. Where the individual then commences a new market-linked pension, this may cause them to exceed their transfer balance cap or have a higher than anticipated account balance.
The government recognises the unintended consequences associated with the current law and is committed to ensuring smooth implementation of the 2016 super reform measures. If an individual’s circumstances align with the above, our practical compliance approach will be:
- We will not take compliance action at this stage if a fund does not report the transfer balance account events of the commutation or the commencement of the new market-linked pension.
- We will not apply compliance resources, at this stage, where the fund has reported the transfer balance debit for the commutation as other than nil.
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.