A specialist SMSF auditor has confirmed the yearly minimum pension payment obligation can be met through the issue of a promissory note at 30 June, but has warned certain conditions must be satisfied for this course of action to be considered valid.
Super Clarity director Shelley Banton said the mechanics of issuing a promissory note and those of a pension payment made in cash via cheque are identical.
“Both [a cash payment or promissory note arrangement] must be dated before 30 June and then cashed promptly. So the money has to be in the [SMSF] bank account when that cheque or promissory note is written for [either] to be valid,” Banton told delegates at the SMSF Association Audit Day 2026 held online earlier this week.
She pointed out this means neither form of payment can be backdated, but acknowledged this could be difficult for auditors to police as the accountant or the trustees of the fund are unlikely to divulge this type of information.
However, she emphasised there is one particular action that must be present with the issue of a cheque or promissory note.
“The main thing here is that the member has cashed [either form of payment] promptly. We would assume here that promptly means the first week in July and there would have to be a good reason, such as the member might be in hospital on life support, if that doesn’t happen,” she explained.
“That obviously means documenting the reason for that delay.”
According to Banton, practitioners need to quash any misconceptions trustees might have regarding these types of situations.
“The problem with all of this is that the client [might think] you, as the auditor, have the authority to determine whether those [pension] payments that are outside of [common practice are] included in [meeting the minimum income stream payment] or not, but unless there are very specific circumstances, it’s really up to the commissioner to decide because we actually don’t have any discretion over that decision,” she indicated.
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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