Procedure for non complying pension fund

Simple Fund 360
#1

Can someone please direct me to the easiest (correct) way to account for the following issue;

Fund with two members commenced pensions in 2017 - in 2019 the trustees forgot to pay the minimum pension payments. For no good reason and will not qualify for any of the ATO exemptions. So I need to treat the fund as taxable for the full year and the two pension payments actually made need to be treated as lump sum payments. Do I need to convert and transfer the opening balances at 1/7/2018 to accumulation or can I just simply use a actuarial percentage of 0%?
TIA
Kerri

#2

You will need to convert the members pension balances who did not meet the minimum back to accumulation mode for the entire year.

And if they want to convert back to pension mode, you will need to set it up and prepare the pension minutes all over again.

#3

Hi @kerri and welcome!

Further to what @JYSUPER said, I’ll refer you to an article in our knowledge base which goes through a similar situation to what you’re facing.

This article goes through a member that has not met the minimum pension payments and the TBAR effects to consider when commuting the pension account:

Minimum pension payments not met

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#4

Another reason you need to commute back to accumulation is that it affects the allocation of income.

I have had a client that benefited from the commutation back to accumulation, as the loss for the year reduced his taxable component only, and was not allocated in proportion to the taxable/tax free components of his balance.

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#5

Thanks for your help everyone.

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