ATO plans to not allocate compliance resources to check whether SMSFs have breached amended minimum pension payment rules in the past should not be regarded as the regulator ignoring other contraventions, a technical specialist has pointed out.
Heffron SMSF technical and educational services director Leigh Mansell said the ATO’s announcement it would not look to identify whether account-based pensions and transition-to-retirement income stream (TRIS) complied with amendments to Taxation Ruling (TR) 2013/5 should be viewed narrowly.
“People were concerned the tax ruling applied from 1 July 2007 and up to the 2023/24 year, which is when the ruling amendments came forward,” Mansell said during a webinar today.
“The ATO has said they are not going to allocate any compliance resources to look for any failed pensions that haven’t been commuted and restarted, but there is an expectation for 2024/25 that any pensions which fail to meet the payment standards will need to comply with the tax ruling as it stands at the moment.
“However, what they are not saying with the no compliance action is also important because I’ve heard a few people say this means they can claim the tax exemption on investment income or still claim the exempt current pension income (ECPI) because the ATO won’t be looking at that.
“That’s not what ‘no compliance activity’ means and in this case it is solely that they are looking for the commutation and the restart in previous years.
“It’s a very narrow set of no compliance activity and we need to be very mindful of that.
“Remember, it’s not a free kick on claiming ECPI for a failed pension, nor is it a free kick to treat payments from a failed TRIS as anything other than a lump sum.”
She said for SMSF members who had failed the minimum pension rules in 2023/24, their advisers should work under the pension payment rules before they changed, which may include a loss of ECPI for that year, with the aim to restart the pension on 1 July this year to avoid a second period where they could also lose ECPI.
TR 2013/5 was released in July last year, prompting calls from the SMSF sector for workable solutions, particularly in regards to death benefit pensions and the impact on TRIS.
