The recent Australian Taxation Office ruling on pensions, TR 2013/5, created the opportunity for advisers to employ new advantageous methods for commencing a pension and liaising with clients, according to a specialist superannuation lawyer.
“The final ruling does open up the possibility that you can embed a pension trigger in the governing rules of the trust deed and that can have advantages,” Townsends Business and Corporate Lawyers special counsel Michael Hallinan told the Super Central Bacon, Super and Eggs seminar in Sydney last week.
“It could be the rules specify that when a member reaches preservation age their interest in the fund automatically converts into a transition-to-retirement pension.
“Equally, you could embed another rule saying the same event occurs at age 60 or 65 or whatever. There is some attraction to that.”
Hallinan said setting up those measures under the new rules helped advisers simplify the retirement income process.
“The advantage there is if you have an automatic trigger in the governing rules, you solve the commencement date issue,” he said.
“You don’t actually have to have a piece of paper signed by the member with the requisite date in order to commence a pension on a convenient date, such as 1 July.”
Along with the ability to embed pension commencements in the governing rules of the fund, he said the recent ruling also encouraged advisers to contact their clients on a more regular basis.
“I suppose the pension ruling now will give advisers a very good professional reason to contact their clients around May or June each year,” he said.
“It’s not only to discuss the final activities for the preceding financial year, but advisers will have to liaise with their clients in May and June with a purpose to discuss what will happen after 1 July in relation to their pensions in their superannuation funds.
“Advisers can have a discussion with their client, the client can then sign a form and have it appropriately dated, and it could be the application form gives effect that the client requests the pension to commence from 1 July and the account balance to be their entire interest in their superannuation find.”