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Dr. Mark Sinclair
Dr. Mark Sinclair, Mentor Education

Advisers warned to check pension start dates after ATO issues new ruling

13 August 2013

Advisers have been warned to pay closer attention to starting dates for pensioners. The warning comes as the ATO issued Taxation Ruling TR 2013/5  – the final ruling on when an account based or transition to retirement income stream commences and ceases.

Michael Hallinan, Townsends Business & Corporate Lawyers special counsel superannuation has commented that the “ATO has retained its strict adherence to its views as to the commencement date of a pension,” and “advisers will have to liaise with clients in May or June to commence a pension from 1 July – rather than in the following February when the accounts are being done.

Hallinan said the ATO had softened its requirement as to what constitutes a commutation of a pension and in a previous draft the ATO stated that only if the annual pension amount was fixed or determinable could the pension be commuted. The ATO had departed from the previous position but has not specified what documentation should be used to commute a pension given that a commutation is the payment of a present lump sum in lieu of future pension payments.

Hallinan questioned that “If a member simply asks for a $20,000 from the pension account is this a commutation or a variation of the drawdown amount,” and does adding the word commutation to the request get it over the line?” He also said that the ruling raises the question whether pension switches should be embedded in the governing rules of the fund so that a pension automatically commences on attaining preservation age or satisfaction of an unrestricted release condition and can be switched off by the trustee simply not making any pension payment.

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