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  • Update on reporting of market linked pensions

    The ATO has advised that it would not take compliance action if funds did not report the required transfer balance account events of the commutation and/or the commencement of the new income stream in CRT Alert 031/2020. This is due to difficulties with reporting market linked pension commutations where the term has expired, and a new pension has commenced.

    New law addressed the nil outcome received when calculating the value of the debit in the transfer balance account. In August 2020, we advised you in a CRT Alert 042/2020 that, due to the delay in publishing our guidelines on calculating the value of the debit, we weren’t expecting any funds to begin to commence their retrospective reporting until November 2020 and we would issue further guidance. On 6 September 2021, the ATO published updated guidance on market linked pensions.

    Treasury has released exposure draft law to amend the regulations to allow commutations of certain capped defined benefit income streams to occur to comply with commutation authorities and address excess transfer balance amounts. This can be found on Treasury consultation. In anticipation of this regulation change, funds who support these products should now prepare their transfer balance cap reporting/rereporting of any commutations that have not yet been submitted using the new calculation.

    The ATO expects that funds will start reporting the new income streams when the regulations commence to ensure that the period in which affected individuals accrue excess transfer balance tax liabilities begins on or after the commencement of the regulations. This will allow appropriate tax outcomes for these individuals given their prior inability to comply with the transfer cap rules.

    If the reporting is before the regulations commence, then your members should contact the ATO if they receive a determination and request an extension of time to make an election.

    We ask that before you commence reporting, engage with your client relationship manager or the client relationship team to advise when you plan to commence so we can support your individual scenarios and issue further instructions if required.

    See also

    CRT Alert 031/2020

    CRT Alert 042/2020

    Updated guidance - market linked pensions

    Treasury consultationExternal Link

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      Last modified: 21 Dec 2021QC 67578