The finalisation of TR2013/5, Income tax: when a superannuation income stream commences and ceases, generated much discussion in the media and industry on the ATO’s view that a pension cease when a fund does not pay the required annual minimum pension amount.
The ATO subsequently considered circumstances that warrant granting an exception that would allow a super income steam to continue, so the fund can claim exempt current pension income (ECPI), even though the annual minimum pension payment requirements have not been met.
The ATO published a Q&A on its website some months ago to highlight the conditions that meed to be satisfied to allow a fund to continue to claim ECPI.
Generally, if a catch up payment is made as soon as practicable, the fund may be able to continue to treat the pension as continuing. when:
• the pension underpayment is less then one twelfth of the minimum pension payment required; or
• the failure to pay the minimum pension payment was because of matters outside
the control of the trustee.
Some of the common circumstances when this exception has been granted are:
• the trustee of a fund has a serious ongoing medical condition that was supported
by documented medical certificates; or
• genuine bank errors when the error was on the part of the bank and not the trustee
(supported by evidence from the bank).
The ATO is currently updating its web material to provide further guidance on when the exception applies (for example, the new material will confirm that the exception can also apply to an allocated pension).
If a taxpayer is 65 years old or over, but under 75, they will need to satisfy the ‘work test’ in each financial year a contribution is made to their super account.
To satisfy the work test, the taxpayer must be gainfully employed for at least 40 hours during a consecutive 30-day period each financial year in which the contributions are made.
The ‘work test’ requirement must be satisfied for the year when the contributions are made rather then when contributions are allocated to their super account.
Ref: ATO – ‘SMSF News” – Edition 29