Records key to minimum pension

minimum pension records

SMSF members must have the correct documentation in place to support their treatment of pension payments taken before and after 24 March, a technical expert has warned.

Documentation is essential in ensuring an SMSF’s compliance with the ATO’s treatment of excess minimum pension amounts for the 2020 financial year, an SMSF technical expert has said.

During a Smarter SMSF webinar yesterday, chief executive Aaron Dunn noted it was essential members understood the nuances of the reduced minimum pension measure implemented earlier this year in response to the financial impact of the COVID-19 pandemic, and had the correct records in place to support their treatment of pension payments taken before and after 24 March.

“Really look at that drop date of 24 March and understand what is being taken out before that date and then what has been taken out after that date,” Dunn said.

“What documentation has been put in place before that date that may allow for any subsequent treatment of amounts that may have been above what was the ordinary minimum pension?

“If that is not the case, and we have an obligation to treat those amounts as minimum pension amounts, then did we have any documentation after 24 March that allows for us to treat those subsequent amounts in a different way other than as income streams?”

Reiterating the ATO’s confirmation that it would not be possible to reclassify pension payments already received by a member, he said auditors would require specific records and documents, such as member requests to trustees regarding the treatment of above-minimum payments, and trustee resolutions confirming acceptance of member decisions, in order to ensure a fund’s compliance.

“Just [make] sure, this particular year, you have all those building blocks in place because these are all the elements that the auditors are going to be looking for, which of course would ensure compliance with what the intent of this law was trying to achieve.”

During the webinar, he also pointed out SMSFs reporting real property assets needed to ensure they provided sufficient evidence in line with the latest ATO guidance to support market valuations.

Last month, SMSF Association deputy chief executive and policy and education director Peter Burgess said the ATO was unwavering in its stance regarding the reclassification to lump sums of payments made above the coronavirus-instigated reduced minimum pension, regardless of whether strategies for the treatment of these overpayments were put in place before the COVID-19 relief measure was announced.

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