A sector specialist has stressed an existing income stream where the SMSF trustees have failed to meet the minimum pension obligation can only be commuted at the time this compliance breach has been discovered.
In particular, Accurium senior SMSF educator Anthony Cullen warned the commutation of the pension in question cannot be recorded as having been performed at the commencement of a financial year if the minimum payment shortfall is discovered after 1 July.
“The ATO’s view is that the member has to consciously make the decision to commute that pension and you can’t make a decision to do something like that six months ago or nine months ago or whatever it is if you’ve only discovered the minimum pension hasn’t been met now,” Cullen told attendees at the recent SMSF Professionals Day 2026.
“The earliest you can make such a decision and act on it is it the day that you are making the decision.
“So if you find out in November or the following April, that’s when you can start putting the paperwork together.”
He warned practitioners against any thoughts of backdating paperwork associated with either the commencement or commutation of a pension as doing so will increase the risk to which they are subject.
“If you’re going to put paperwork in front of your clients and talk about backdating documents, that is a reflection on you as much as it is on the clients and I would not recommend that to anybody,” he cautioned.
He pointed out there is an additional factor requiring consideration regarding the timing of any commutation instruction linked to the failure to comply with the pension payment standards.
“If the accountant, after preparing the accounts, discovered the shortfall on 15 April, but it wasn’t until 1 May that the client made the decision of how they are going to act on the situation, that’s okay because you are allowing that couple of weeks to communicate the circumstances to the client,” he explained.
“So yes, if you discover it on one day, it is unlikely that the trustee or the member is making the decision to commute on that day as well. So there will be a bit of a lag.”
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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