The SMSF Association is continuing to engage with the ATO regarding the practical consequences of Taxation Ruling (TR) 2013/5 to find a solution to the increased administrative processes the revision to this instrument has created.
TR 2013/5, which defines when a superannuation income stream commences and ceases, was amended in 2024 and now dictates not satisfying the minimum payment standard in a particular financial year will mean the pension in question will no longer be treated as a pension for tax purposes from 1 July of that income year.
“That means every payment [made in the year of underpayment] is no longer a pension [drawdown], but is instead treated as a superannuation lump sum,” SMSF Association head of policy and advocacy Tracey Scotchbrook told attendees of a recent post-budget practitioner webinar.
“The problem arises because of the administrative burden that is an outflow of this [taxation ruling amendment] from having to treat each of these payments as a separate lump sum.
“[In some cases] we might see a merging of member interests, the need to recalculate tax-free and taxable components before every withdrawal, the potential to re-report earlier pension payments as transfer balance account events.
“So there is a lot of reverse workflow being created as a result of this.”
According to Scotchbrook, the compliance actions now required under TR 2013/5 are disproportionate to any risk the ATO might perceive as stemming from not satisfying the minimum pension obligation.
As such, she indicated the SMSF Association is taking proactive steps to address the situation.
“The association has been trying to engage with the ATO for an administrative solution under the commissioner’s existing powers, but while the ATO has acknowledged the issue, any proposal that we have put forward has so far been rejected, so this problem unfortunately persists,” she said.
“This is a classic example of where a technical interpretation produces a result that looks correct on paper and looks quite straightforward on paper, but breaks down completely in practice when you look at what is actually required to be undertaken to achieve [compliance with TR 2013/5].”
She confirmed the industry body will continue to work with government to seek a fix for the situation.
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Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
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