SMSF members planning on reporting a revised commutation value on a pre-1 July 2017 market-linked pension may wish to hold off on that move until further information is released by the government around the treatment of commutations in excess of a transfer balance account, a technical expert has advised.
Accurium head of education Mark Ellem said while retrospective amending legislation applicable from June 2020 meant any commutation from a pre-1 July 2017 market-linked pension required a revised calculation of that commutation and either its reporting or re-reporting to the ATO, a proposal in the “Mid-Year Economic and Fiscal Outlook (MYEFO)” gave reason to pause this plan.
“When the amending legislation came out, the ATO put out a practical compliance approach with two choices for where you didn’t report the commutation and restart of the new market-linked pension or you could report a commutation value other than nil,” Ellem said.
“Now those who did record a value relied on the examples in the explanatory memorandum to the original bill and calculated accordingly, but the revised rule is somewhat different from that and can result in a different outcome.
“When you do that calculation it may result in a higher transfer balance account balance apart from what otherwise would have been expected and the ATO updated their website to say funds will need to review the information already reported and consider whether this needs to be re-reported.”
He said the ATO had planned to provide further guidance by the end of November 2020 as to how this reporting was to be done, but had yet to do so, however, advisers should still be reviewing their client base to see what funds may have commuted a relevant pension before the new calculation method was released.
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