This Ruling, released on Wed 31.7.2013, sets out the Commissioner’s final views on when a “superannuation income stream” (reg 995-1.01 of the ITA Regs) commences and when it ceases, and consequently when a superannuation income stream is payable. The Ruling was previously released as Draft Ruling TR 2011/D3 and has been subtly revised in several respects. When a superannuation income stream commences and ceases is relevant for a superannuation fund to qualify for a tax exemption on its assets set aside to pay current pensions and impacts on the tax treatment of member benefits.
The Commissioner accepts that a superannuation income stream (eg an account based pension or transition to retirement income stream) may commence before the due date of the first payment, depending on the rules, which govern the superannuation income stream. However, the Commissioner says the commencement day cannot precede the date of the member’s request or application.
The Ruling states that a superannuation income stream ceases as soon as the member in receipt of the superannuation income stream dies, unless a dependent beneficiary of the deceased is automatically entitled to receive an income stream.
A superannuation income stream also ceases if the minimum annual pension amounts are not paid in an income year, or when a member’s request to fully commute their entitlements to a lump sum takes effect.
However, the Tax Office says that an income stream does not cease when a member (or dependant beneficiary) applies to “partially commute” some of their entitlements to a lump sum. When a partial commutation takes effect, the member may make an election under reg 995-1.03 of the ITA Regs for the payment of the partial commutation to be treated as superannuation lump sum (instead of an income stream benefit). The election must be made before the partial commutation payment is made for it to be treated as a lump sum.
DATE OF EFFECT: Applies from 1 July 2007. However, the Commissioner said he will not take compliance action in respect of a superannuation income stream that ceased on the death of a member before 1 July 2013. Furthermore, the Commissioner accepts that a partial commutation payment made before 31 July 2013 is a superannuation lump sum, unless the person has treated the payment as a superannuation income stream benefit.
[LTN 146, 31/7/13]
Partial commutation of superannuation account based pension – Self Managed Superannuation Funds Determination SMSFD 2013/2
This Determination, released Wed 31.7.2013, states a payment made as a result of a partial commutation of an account based pension (other than a transition to retirement income stream) counts towards the minimum annual pension payment amounts under reg 1.06(9A)(a) of the SIS Regs, unless the partial commutation payment is rolled over within the superannuation system on or after 6 June 2009. Note that reg 1.06(9A)(a) refers to the total of payments in any year (including under a payment split) but, since 6 June 2009, excludes amounts that are rolled over.
Consistent with the view in Taxation Ruling TR 2013/5 (see above), the Commissioner considers that a partial commutation payment is a lump sum and counts towards the minimum pension amounts regardless of whether the payment is made in cash or in specie. However, the Tax Office says that a payment made as a result of a full commutation cannot count towards the minimum annual pension amounts as the account based pension ceases before the full commutation payment is made.
DATE OF EFFECT: Applies from 1 July 2007.
[LTN 146, 31/7/13]