ATO, Pensions

ATO discretion worth pursuing

ATO discretion pension

Applications for ATO discretion should always be made where a minimum pension payment has not been met and self-rectification cannot be used.

A specialist SMSF lawyer has recommended practitioners should always encourage clients to make a submission to the ATO for compliance discretion in all instances where they have failed to meet their minimum pension obligation and the underpayment is above one-twelfth of the required amount.

DBA Lawyers director Daniel Butler said advisers should suggest this course of action even though the examples of when an application for regulator discretion regarding the underpayment of a minimum pension would be successful outlined in ATO QC 39769 are extremely limited.

“The examples on the website are not encouraging. However, even though some of these examples are not encouraging, I can use the old adage, nothing ventured nothing gained,” Butler told attendees of his most recent SMSF online update.

“And it’s surprising as an adviser over the years how that adage has benefited my clients to say ‘if you’re willing to have a go, we’re not promising anything, you might get lucky’.”

Further, he pointed out advisers who are reluctant to apply for ATO compliance discretion may be opening themselves up to legal action brought against them by a client experiencing this set of circumstances.

“If you tell a client they haven’t got a chance [of successfully receiving ATO compliance discretion for not meeting their minimum pension payment], you might get sued for being negligent because someone else might have a go and they might get up,” he noted.

“So you’ve got to be very careful [in these situations] when you are [acting] in a professional capacity giving advice, whether it’s positive or negative.”

He reaffirmed if the minimum pension underpayment is less than one-twelfth of the required amount, SMSF trustees can use the existing compliance concession and make a catch-up payment as soon as they can if their failure to meet the drawdown obligation was due to an honest mistake or circumstances out of their control.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital