ATO, Pensions

Minimum pension shortfall may trigger reporting dilemma

minimum pension shortfall

Trustees will more than likely face a reporting dilemma should they request the ATO to exercise its discretion to rectify a minimum pension shortfall.

Applying for ATO discretion to rectify a minimum pension shortfall will result in trustees having to manage a reporting conundrum, a technical specialist has warned.

“The issue about going to the ATO is also one about timing. [That’s because] you may not have figured out that you didn’t meet the minimum until after the end of the year,” SuperConcepts SMSF technical and strategic solutions executive manager Philip La Greca said during a recent technical webinar.

“[The question will be] do you apply for this discretion before you prepare your accounts for that particular year. Now ideally you’d want to do that because that way you won’t have to amend the return.”

If the trustee chooses this course of action, they will then have to decide what information will be included on the return.

“[So the trustee has to ask themselves:] ‘What do I do? If I don’t find out [about the shortfall] until I’ve prepared my accounts and I’m due to lodge them, do I hold off lodging, apply for discretion, and then once I get the response from the ATO, lodge the return?’

“‘Or do I lodge the return?’ and then the question becomes: ‘Do I lodge it on the basis that [the ATO will exercise its discretion], in which case if [it doesn’t], I’ve got to amend the return.’”

La Greca pointed out the opposite side of the dilemma would see the trustee lodge the return on the assumption that the regulator will not exercise its discretionary powers allowing a minimum pension shortfall rectification and then amend it if the ATO decision ends up being favourable.

“That’s the dilemma. So the sooner you know [you are not going to meet or have not met] the minimum, the better,” he advised.

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