CRT Alert 066/2018

3 August 2018

[Advice_for_funds_where_members_have_a_ma]Advice for funds where members have a market-linked pension

We are aware of circumstances where an individual was receiving a life expectancy or market-linked pension just before 1 July 2017. This was a capped defined benefit income stream and they then commuted the pension on or after 1 July 2017. The transfer balance debit, worked out under the special value rule inIncome Tax Assessment Act 1997 subsection 294-145(1), would be nil.

Where the individual then starts a new market-linked pension, this may cause them to exceed their transfer balance cap or have a higher than anticipated account balance.

The government recognises the unintended consequences associated with the current law and is committed to ensuring smooth implementation of the 2016 super reform measures.

If an individual’s circumstances align with the above, our practical compliance approach will be:

o We will not take compliance action at this stage if:

§ a fund does not report the transfer balance account events of the commutation or the commencement of the new market-linked pension

§ the transferring fund does not report the commutation and the successor fund does not report the new market linked pension when the events occur as part of a successor fund transfer

o We will not apply compliance resources, at this stage, where the fund has reported the transfer balance debit for the commutation as other than nil.

Next step:

o If you are concerned about how a member may be impacted email