A professional body senior executive has recognised the upgrade to Taxation Ruling (TR) 2013/5 “Income tax: when a superannuation income stream commences and ceases” will require trustees who have failed to comply with the minimum pension payment obligation to revisit the tax components of their SMSF balances.
“[After the upgrade, the ATO is] saying the pension fails to meet the SIS (Superannuation Industry (Supervision)) Regulations [if the minimum payment standard has not been met] and they have to physically commute it and start a new one to get ECPI (exempt current pension income) again,” Institute of Financial Professionals Australia (IFPA) head of technical services Natasha Panagis told delegates at The Super Playbook 2025, co-hosted by IFPA and The Auditors Institute in Sydney last week.
“[That means] you have to recalculate the tax components when you start a new pension because if it has failed from 1 July, any earnings that would have accrued during that year could have contributed to a taxable component.”
On top of this required action, she pointed out payments made from the end of the financial year where the minimum pension had not been met and the time of the discovery of the compliance breach also had tax consequences for the SMSF.
“[So] if the client made any pension payments [in this period], they’re now seen as lump sums. So you’ll need to work out the tax components for every lump sum payment that has been made from that pension as well,” she said.
As such, she suggested adhering to the latest version of TR 2013/5 in the event of not satisfying the minimum pension payment requirement will cause significantly more administrative work for trustees.
“[It means they’ll] need to do market valuations [when the error is discovered] and interim financial [statements] to work that all out,” she explained.
“So there will be a lot more red tape [as a result of] this updated view from the ATO.”
