A senior technical expert has made practitioners aware of an unresolved issue with how the updated version of Taxation Ruling (TR) 2013/5 “Income tax: when a superannuation income stream commences and ceases” applies to death benefit pensions when the minimum payment requirement has not been satisfied.
Colonial First State head of technical Craig Day warned it is now unclear whether the ATO’s previous approach to these situations still applies in light of the revised ruling.
“As per [Superannuation Industry (Supervision) (SIS) Regulation] 6.21, [I either pay a death benefit] as a lump sum or I pay it as an ongoing income stream. But [what happens if the minimum pension has not been met and] the pension has stopped?” Day asked delegates at the SMSF Association National Conference 2025 hosted in Melbourne last month.
“We picked this up back in 2017 and the SMSF Association wrote to the ATO [and asked:] ‘What happens in that situation? Please don’t tell us that because we failed the pension minimum we now have to take a lump sum out of superannuation because we might not be able to get it back in.’”
According to Day, the regulator at that time stipulated in these circumstances as soon as the trustees become aware of failing to satisfy the minimum payment obligation, if they commence a new pension immediately, it will be seen as they have still adhered to SIS Regulation 6.21.
“So everyone was reasonably happy with that, but what’s now happened, because of this issue with [TR] 2013/5, I understand the industry has written to the ATO and the [regulator] has had a look at that particular issue and said: ‘Well that’s a SIS issue and we’re just dealing with a tax issue and therefore we’re not going to answer the question,’” he explained.
“So now we have uncertainty and from my understanding the SMSF Association is [now] going back to the ATO to say: ‘Can you please reconfirm what you previously said to us that it would be okay just to start a new income stream.’”
