In circumstances where an application for ATO discretion is lodged, to allow an SMSF to claim exempt current pension income (ECPI) when it has failed to pay the required minimum pension amount, best practice is for the fund not to make the claim until after the application is made, a technical services manager has said.
“We’ve had success in relation to applying to the commissioner for discretion and the way we’ve approached it is we haven’t claimed the ECPI in relation to the pension that failed to pay the minimum pension on the fund’s annual return lodged for that year,” SuperConcepts SMSF services executive manager Mark Ellem told delegates at this year’s SMSF Professionals Day, co-hosted by selfmanagedsuper and SuperConcepts.
“Then once the assessment was effectively issued, then we’ve lodged an objection to the assessment on the grounds that we request the commissioner to exercise discretion to treat the fund as if it did make the minimum pension payments.”
Ellem pointed out while this method was the one SuperConcepts favoured, trustees and their advisers could apply for discretion before they lodged the annual return if they did not want to go through the process of lodging an objection to the assessment.
“You can contact the ATO and say we’ve discovered the fund has not paid the minimum pension, we haven’t lodged the return yet, we want to apply for discretion by the commissioner so that we can claim that ECPI,” he said.
He emphasised an application for discretion must be made if an SMSF wants to claim ECPI when the minimum pension payments have not been met and the payment shortfall is greater than one-twelfth of the annual minimum pension amount where trustees can self-assess the situation.
ATO discretion also had to be sought if the self-assessment provision had previously already been used, he added.