A senior SMSF stakeholder has called for practitioners and trustees not to rely on receiving ATO discretion to address a situation where the minimum pension obligation has not been satisfied as the probability of achieving a successful outcome is very low.
“In my time, from an administrative point of view, I’ve seen the discretion issued once [and as I look at this course of action more recently], I’m getting more and more examples of people not getting that discretion from the commissioner,” Smarter SMSF education and technical manager Tim Miller told attendees at the ASF Audits Technical Seminar 2025 recently held in Melbourne.
“[The reason being the ATO wants] to know why you didn’t pay the [minimum] pension. I don’t know if you spend a lot of time reading interpretive decisions that the ATO makes on various tax issues, but most reasons [used to justify a breach] don’t cut it with the commissioner.
“If you look at [situations like those involving] excess contributions, and people say [to the commissioner:] ‘I’d like you to not treat [the offending amount] as an excess contribution because I was sick, my accountant was sick, everyone was sick, we were travelling,’ every reason possible, and the commissioner [usually responds by telling the trustee:] ‘You should know what the law is and the law says you have to pay the minimum pension.’”
Miller indicated the circumstances will not prevent him from suggesting trustees consider applying for ATO discretion when they have failed to pay the minimum pension amount for a particular year.
“[But] I’d probably encourage more people to forget about it and instead [concede] we’re in a better position if we just stop this existing pension and start a new one,” he said.
In order to prevent trustees from breaching the pension payment standards, he recommended practitioners incorporate a review of all income streams their clients might have in their SMSFs as early into a new financial year as possible.
