Bureaucracy Wins Out
Somewhere in the bowels of Government the gremlins are hard at work dreaming up new and totally unproductive ways to occupy our time. The latest result, PCG 2017/5, is a requirement for SMSF trustees to enter into a written, irrevocable agreement with a member, by 30th June this year, to commute the member’s pension balance over the $1.6m retirement balance cap on 30th June. Furthermore, the agreement must specify the pension interests that will be reduced and, if there are multiple pensions, the order of their reduction. Provided that this is done by 30th June there will be no enforcement action taken. Presumably this document is to be provided to the fund auditor with the financials, sometime after the 30th June, to prove that it has been done by the 30th June.
This is the concession that the ATO have decided upon because they understand that SMSF trustees do not know their member balances until the audited accounts are available, sometime after the event. An alternative methodology would have been to merely see what the members had arranged when they received the accounts but that would have been far too practical. We will produce an appropriate template as required.