The ATO has ruled out any adjustments to how it treats minimum pension payments under revisions made to Taxation Ruling (TR) 2013/5 despite calls from the advice and superannuation sector for change, SMSF Association chief executive Peter Burgess has stated.
Speaking at the SMSF Association Technical Summit 2025 in Sydney last week, Burgess acknowledged the revisions, which will require a pension that has not met the minimum payment standards to be commuted and restarted to retain its exempt current pension income status, were different to long-standing industry practice.
He added while the ATO committed to a non-compliance approach to checking if pensions that made an underpayment before 30 June 2024 were commuted before a new pension started, it was not willing to make further concessions for other pension-related matters.
“Going forward, if a pension today has failed payment standards in the previous financial year, then under the ATO’s interpretation any pension payments that have been paid since, if that pension wasn’t commuted and restarted, have to be recalculated on 1 July this year,” Burgess explained.
“We’re asking for a practical, pragmatic approach to compliance here and for the ATO to issue a legislative instrument to allow trustees to apply the proportioning rule as determined on 1 July for all lump sum withdrawals from a failed pension.
“In other words, using the tax and tax-free components that apply from 1 July so we don’t have to recalculate for every payment since then.
“The ATO has come back and said it cannot issue a legislative instrument that is not consistent with the policy intent of the proportioning rules.”
According to Burgess the request to the ATO was made by a consortium of industry bodies which also asked for parity in the treatment of different types of pensions.
“We asked how do we apply this interpretation to other types of pensions such as defined benefit pensions which can’t be commuted if they fail to meet minimum pension standard?
“The ATO responded to those questions by stating TR2013/5 only applies to account-based pensions.
“So, we didn’t get a lot of joy here from the ATO but you can see what we’ve been asking for.”
