SMSF members wishing to commence a pension at the start of a financial year but have not calculated the minimum payments should still do so and then inform the trustee of the details later rather than backdate the beginning of the income stream, according to a technical specialist.
Smarter SMSF education and technical manager Tim Miller said the recently updated Taxation Ruling (TR) 2013/5 demonstrated the ATO would be looking at what constitutes a superannuation income stream and if a request by a member for that stream was received before the first payment was made.
“We need to identify and acknowledge pension commencements and if we are talking about pensions with a 1 July start date, how do we go about that process?” Miller said yesterday during a presentation hosted by SuperGuardian.
“I have put there [on screen] the word, the dirty word in superannuation, backdate, but it’s a word we don’t want to associate with the way we administer superannuation funds.
“It is a word that springs to mind when people say ‘I started this pension on 1 July and it’s now November … so we have to backdate the documents’.
“What you needed to do, if the pension is taken from July until November, was to get the numbers to work out what the pension minimums are, but you still needed to get the application placed before 1 July.
“So the member must apply to commence a pension on 1 July and the documentation you implement in November reflects the request to commence a pension on that date and are the final numbers to make that pension work.
“It’s a two-stage process when you’re looking at pension commencements in SMSFs.
“Firstly, to ensure you’ve got that acknowledgement piece prior to the start date that you want the pension to commence, and then you’ve got the supporting documentation to finalise all of the necessary information, primarily from a transfer balance cap point of view with regards to ongoing reporting obligations.”
He added for SMSF members tempted to backdate a pension commencement it was now almost impossible to do so without breaching the guidance in TR2013/5.
“The information that is provided within the tax ruling says the commencement day can’t occur prior to the day established in the terms and conditions agreed between the member and the trustees that will govern the superannuation income stream,” he said.
“So again, the terms and conditions of the pension documentation is going to be critical to determine whether or not the pension has commenced and, arguably, the idea that a pension is backdated doesn’t exist and shouldn’t exist.”
