Reporting quirk with pensions spurs advice struggles
The ATO has established that reversionary pensions must be reported straight after death, but a lack of information about the pension in the 12-month period after death is causing difficulties for SMSF professionals.
In October, the SMSF industry was largely surprised to learn that the transfer balance account report for the reversionary pension needs to be lodged just after the member’s death.
Hayes Knight director of SMSF services Ray Itaoui said that before the ATO clarified this, the assumption was that the event would be lodged 12 months down the track, when the reversionary pension is applied to their transfer balance cap.
The ATO has clarified that they expect the reporting to happen as though the event had occurred in the same quarter, even though it won’t actually count towards the transfer balance cap 12 months later.
The information that’s been reported about the reversionary pension will be included in a suspense account within the member’s transfer balance account, he said.
Mr Itaoui said that the process of reporting the reversionary pension straight away as opposed to 12 months later makes sense, as it helps the member to be aware that there’s an amount coming into their transfer balance cap and also ties in better with the processing of the tax return.
However, given that SMSF professionals can’t actually see what’s in the suspense account, this makes it difficult for them as they have to separately track the reversionary pension amount.
“If we take over a fund from another accountant or somebody comes into that relationship who doesn’t have access to that pension information, it’s very difficult to know that there’s an amount sitting in suspense,” Mr Itaoui said.
“If you’re trying to advise this client on their pensions and come up with strategies around their estate planning without knowing that amount is in suspense, you could run with assumptions that could change the final outcome.”
He expects that the ATO may provide access to these suspense accounts next year, with the SMSF industry looking for greater transparency with this kind of information.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
