An SMSF specialist has reminded trustees they can commence a pension even if the official documentation for the income stream has not been completed, provided they meet compliance requirements under superannuation law.
While acknowledging pensions cannot be formally backdated, SuperCentral superannuation special counsel Michael Hallinan pointed to a specific arrangement where a pension will comply with statutory requirements if trustees find themselves in this situation.
“If the trustee and the member have informally agreed that a pension would commence from a particular date in a financial year and pension payments are made in that financial year and the aggregate of the pension payments are sufficient to satisfy the minimum pension drawdown requirement for that financial year, then the pension will have commenced on the first day of the period used to calculate the minimum drawdown requirement as per the informal agreement between the trustee and the member,” Hallinan stated.
“Where a pension has been informally commenced, pension documents can be prepared and issued which confirm the prior commencement of the pension. As these pension documents confirm the previous agreement, they need to be dated with the date of issue of the documents.
“Confirmatory pension documents are issued primarily due to the delay in obtaining precise figures for a 1 July commencement date. In this situation, a best guess as to the estimated pension balance as at 1 July could be used to calculate the minimum drawdown requirement for the financial year.
“Once audited figures are available, the correct minimum drawdown requirement can be determined and any appropriate adjustment to the document can then be made.”
He noted an income stream will be considered compliant where at least one pension payment has been made to a member in a financial year, with no more than a 12-month gap between payments, and sufficient pension payments are made in a financial year to satisfy the minimum payment requirement.
“It is possible for a member and the trustee to agree on or before 1 July that a pension will commence on 1 July. Once audited figures for the financial year are available in the following May, pay the first pension payment in the following June, but before the end of the financial year,” he said.
“In this scenario, the pension has been issued as there was an agreement between the member and trustee, the commencement balance of the pension was adequately specified, the June 2025 pension payment will be determined by reference to the audited figures and the June 2025 payment will equal or exceed the minimum pension drawdown for the financial year.”
