Shortfall in pension

shortfall in pensionIn February 2014, the Australian Taxation Office published a FAQ to clarify the minimum pension payment requirements.

Below will explain these requirements at a glance.

What if fund fails to meet minimum pension?

Fund cannot claim exempt current pension income deduction.
The pension account will no longer support an income stream payment.
Any payments during the year will be treated as lump sum.

What if fund meets minimum pension in the subsequent year?

In the subsequent year, it will be treated as if the fund commenced a new pension.

Can the fund accrue the shortfall in pension to meet minimum pension requirements?

No, any catch-up payment must be made as soon as practicable (within 28 days upon the trustee become aware of the shortfall).

Are there any circumstances where the fund is allowed to continue to claim exempt current pension income deduction although the minimum pension has not been met?

Yes, only when:

  • It is a honest mistake by the trustee.
  • Short fall amount does not exceed 1/12 of minimum pension.
  • Matters outside trustee’s control.
  • A catch-up payment has been made as soon as practicable (within 28 days upon the trustee become aware of the shortfall).
  • The catch-up payment is treated as if payment was made in prior year.
  • Applies for first time shortfall i.e. if there is short fall in subsequent year, then pension exemption will not be available.

Which pension account does the exception above apply to?

All account-based pensions including those commenced prior to 19 September 2007.

Does the exception above apply to the circumstances where a fund breaches the TRIS limit of 10%?

No.

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DISCLAIMER: This information is an interpretation of rules, regulations and standards. It should not be considered as general or specific advice and neither purports, nor is intended to be advice on any particular matter. No responsibility can be accepted for those who act on the contents of this publication without first obtaining specific advice. Liability limited by a scheme approved under Professional Standards Legislation.