Compliance | Failure to Pay the Minimum Pension & ASIC Alerts

FAILURE TO PAY THE MINIMUM PENSION

The ATO recently updated Tax Ruling TR 2013/5 titled “When a superannuation income stream commences and ceases”.

The ATO now considers that if the minimum pension isn’t drawn for a year that the pension ceases at the start of that financial year. The pension can only restart when the member requests that a new pension commencement. This can have several serious consequences. The shortfall may only be realized when that year’s financial statements are prepared which may be six or seven months after the end of the financial year. This means that 18 or 19 months of income within the superfund may be taxed rather than being exempt pension income. As the pension is deemed to have ceased, the pension amount will revert back to the accumulation account. This can affect tax planning where the pension account contained mainly tax free components. If the fund had sold assets which had large capital gains the pension exclusion may result in a much larger amount of tax being paid in the fund. There is a one off exclusion where the shortfall is less than 12% of the minimum.

ASIC ALERTS

ASIC has issued two warnings. One is regarding aggressive sales tactics and misleading advertising targeting people to switch their superannuation savings into high risk investments. Remember the old quote “if it sounds too good to be true it probably isn’t”.  ASIC advises consumers to seek independent advice and consult ASIC’s Moneysmart website.

The other warning relates to scammers impersonating ASIC websites. The scammers aim to collect sensitive information from unsuspecting people. ASIC confirms that the only legitimate ASIC Connect websites are asicconnect.asic.gov.au and connectonline.asic.gov.au