subscribe to our newsletter
Treasury, ATO seek to resolve double counting issue for legacy pensions

Treasury, ATO seek to resolve double counting issue for legacy pensions

ATO
Miranda Brownlee
01 June 2018

SMSFs looking to roll over market-linked pensions have been told to hold off with Treasury and the ATO working on a potential solution to the double counting issue under the transfer balance cap.

ATO assistant commissioner Tara McLachlan said individuals need to be very careful when commuting life expectancy and market-linked pensions that are capped defined income benefit schemes as there is an issue with how the pension is recorded under the transfer balance cap.

“There is an issue with the provision that provides for the for the transfer balance cap debit [in these situations]. What actually happens is it will produce a nil debit. So if you’re commuting one of those pensions that’s capped defined and rolling it into a new market-linked pension that’s not, you’ll get a credit, a nil debit and then another credit. This might cause issues for clients if they go into excess,” she explained.

“We’ve been working on this and we recognise that wasn’t the intention of the explanatory memorandum. We’ve been looking at the commissioner’s remedial powers and seeing if that’s possible to apply and talking to Treasury.”

Treasury and the government recognise the unintended consequences associated with the current law and have stated that they committed to ensuring the smooth implementation of the 2016 reforms.

“I would suggest that if you have a client in this situation who wants to commute, then perhaps stop and rethink before you get into that situation, or if it has happened already then you’ll need to watch this space,” she said.

Treasury, ATO seek to resolve double counting issue for legacy pensions
smsfadviser logo
join the discussion

What do you plan to do in response to the new adviser education standards?

SUBSCRIBE TO THE
SMSF ADVISER BULLETIN

Get the latest news and opinions delivered to your inbox each morning

In this month's issue:

  • Time wrap
  • The tech bull run
  • From hobby to passion
  • Golden Years
  • An untimely reminder
  • Why change is so difficult
  • Key Strategies for equalising super