The tax office recently clarified what happens when the trustees fail to pay the minimum pension for a member for the financial year. Where this occurs, the pension is considered to cease from the start of that financial year.
This means that any amounts that may have been taken during the year will be treated as superannuation lump sums for both income tax and SIS Regulations purposes. The fund will not be entitled to treat income or capital gains as Exempt Current Pension Income (ECPI) for the year.
If the pension standards are met in the following income year, then this will result in the commencement of a new pension in the following year. The trustee will need to revalue assets at market value and recalculate the minimum pension payment required at the start of that year. The trustees may also be required to recalculate the tax components of the member's account
The Tax Commissioner has some discretion where the trustees made a genuine mistake and the underpayment was small - no more than 1/12th of the minimum required or, where the matter was outside of the hands of the trustee.
For the Commissioner to give his discretion the trustees need to make a catch up payment as soon as practicable and treat the payment as if it had been made in the previous financial year.
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Last updated March 2013. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.