SMSFs not meeting minimum pension rules - new ATO guidance

The Australian TAX Office (ATO) has published guidance on starting and stopping superannuation income streams in Self-managed superannuation funds (SMSF). The guidance is useful for SMSF trustees who are dealing with situations where the minimum pension payment requirements are not met in an income year.

The guidance outlines the circumstances involving breaches of these requirements in which the Commissioner may exercise his power of general administration to treat a pension as having continued. It also includes several useful examples.

Background - income stream ceases if minimum payment requirements are not met

If the minimum pension payment requirements are not met in any given income year, the ATO considers that the income stream ceases from the beginning of the year. The implications can included:

• fund tax: the fund's income on the assets that were supporting the income stream (including capital gains) may not be exempted from tax in that year; and
• benefits tax: any payments made in that year may not be taxed as income stream benefits and will instead be taxed as lump sum benefits

Click here to read Macquarie's article on the new ATO guidance