Super Fund Pension draft ruling will apply from 2007 – will your Superannuation Pensions comply?
The ATO has recently released draft ruling TR 2011/D3 – Income tax: when a superannuation income stream commences and ceases. This ruling is proposed to apply from 1 July 2007 and its relevance for advisers and trustees is high, as it has taxation implications for both superannuation funds and their members.
The first aspect of this ruling is the determination of when a superannuation income stream commences. In order for a superannuation pension to be deemed as ‘commencing’, and consequently in order for the member to receive concession taxation status via their superannuation pension account, there are a number of requirements that must be satisfied. These requirements are largely manifested in the documentation that needs to be put in place for the pension commencement.
The key requirements of documenting your client Superannuation Pensions include:
- The terms of the pension need to be set out in the superannuation fund’s trust deed. This means your superannuation trust deeds need to provide the terms of the pension in detail, not just in a general pension clause.
- The member and the trustee need to have agreed to the terms and conditions that will govern the superannuation income stream. This means a comprehensive pension agreement must be put in place.
- The pension documents need to show the requirements for pension payments, partial or full commutations, that pensions can’t be added to, what happens on death and when the pension ceases.
- SMSF Trustees need to be aware that if any of the payment standards under the Superannuation Industry (Supervision) Act 1994 are not met, the pension will be deemed to not exist.