The SMSF Association is urging caution following the release of updated guidance from the ATO around exceptions to minimum pension payment requirements.
The new guidance explains when a trustee can self-assess access to the Commissioner’s General Powers of Administration (GPA) as to whether their account-based pension can continue even if the annual minimum pension payment has not been met.
The exception can only apply if the pension payment amount was not paid in full because of an honest mistake, and it does not exceed one-twelfth of the minimum pension payment in the income year, or there were matters outside the trustee’s control.
However, the SMSF Association has noted ‘matters outside their control’ does not stipulate the sum in question need not exceed one-twelfth of the minimum pension payment for the year as it does in the case of an ‘honest mistake’.
“While the circumstances the Commissioner would accept matters outside the trustee’s control are typically quite limited, trustees should approach self-assessment cautiously when shortfalls exceed one twelfth of the minimum pension payment,” SMSF Association head of technical Mary Simmons told selfmanagedsuper.
In the website guidance the ATO uses the example of members of a two member SMSF where both members are injured in a car accident just before the final pension payment for the relevant year and spend extended periods in hospital recovering unable to make pension payments.
“Reliance on the Commissioner’s GPA, without clear parameters available to industry, raises uncertainty as to whether the outcome will provide the expected protection for exempt current pension income,” the SMSF stated in its membership newsletter, stressing the legal foundation for the change was not clear.
The industry body has received assurance from the ATO that the web content is an accurate description of what is required, but Simmons said the SMSF Association will continue to advocate for further clarity.
