An SMSF specialist has identified the administrative burden practitioners and trustees will be faced with as a result of the update of Taxation Ruling (TR) 2013/5 where a fund fails to satisfy the minimum pension payment obligation.
The latest amendment to the TR 2013/5 specifies an income stream that has failed the payment standards must be commuted with trustees then having to commence a completely different pension should they want to continue with this type of drawdown arrangement.
“There are so many issues associated with this because you’re only finding out [the income stream has failed] after the end of the [financial] year, after you have processed the fund for [that] full year…and you’ve processed the payments in accordance with the tax-free and taxable [components] of the pension,” Smarter SMSF education and technical manager Tim Miller told delegates at the ASF Audits Technical Seminar 2025 held recently in Melbourne.
“So you, as administrators and accountants, [will] have to redo the entire year [of financial record keeping] so it’s doubling up the administration work for every fund that fails to pay the minimum [pension amount],” he added.
According to Miller, the accounting issues outlined above are not the only administrative repercussions of the latest version of TR 2013/5.
“[Should the required minimum payments not be met] the pension will have failed for SIS (Superannuation Industry (Supervision)) [Regulation] and tax purposes from 1 July, you’ll have no ECPI (exempt current pension income) there, you’ve got your TBAR (transfer balance account report) at the end of the year, you’ve then got the time [period in] which you have to lodge for the new year where you’re also not going to get your ECPI,” he explained.
“And then you’ve got your new pension. So what comes with a new pension? [Determining] how many days [in the year it has existed] and then [having to make a pro-rata minimum pension payment] to 30 June.
“[It will also require] a full set of documentation and your new reporting requirements as well.
“So there are so many things to factor into failing the minimum pension.”
He acknowledged the SMSF Association is currently asking for a practical solution to this issue but said the ATO has not offered any response to date.
