An SMSF technical specialist has confirmed the ATO views a pension commutation as definitive and not as an action trustees can simply reverse should they discover exiting the associated money from the superannuation system was made in error.
To illustrate this point, Accurium senior SMSF educator Anthony Cullen revealed he had witnessed client circumstances where a part commutation of an income stream was performed on the strength of an excess transfer balance account determination issued by the regulator.
“I’ve seen situations where the individuals have received the determination. They’ve gone through the process and lodged a paper form to say they’ve [made the necessary] commutation because they wanted to get it done as soon as possible,” Cullen told attendees of a recent webinar he hosted.
“But then when it came to light it was discovered there were a couple of entries that were lodged incorrectly and once they were reversed and corrected, the client didn’t have an excess [transfer balance account] amount at all and they didn’t need to take any money out.
“So the client has actually gone back to the ATO and said ‘well I didn’t need to take this money out’ [and] they actually took the money out of the system, they didn’t just put it [back] into accumulation phase.
“[As such, they asked] the ATO can they put the money back in and the ATO said no. [The regulator said:] ‘You’ve gone through the process and that was a legitimate payment out of the system. For you to put the money back in now, it’s going to be a contribution.’”
According to Cullen, in this instance the money was not able to re-enter the system due to contribution constraints such as the member’s age.
Further, he pointed out the situation should confirm how an excess transfer balance cap determination should be viewed and treated.
“[When] you get a determination, what that is it’s the ATO saying this is what we believe to be the case. If you think that’s wrong, you need to do something about it,” he said.
