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Tuesday, 09 October 2012



Thanks for the useful summary Brian.

Quick question, based on the facts of this ATO ID, if the trustee upon commutation of the complying pension put 5% of the pension account balance ($1.2m x 5% = $60k) plus $21,250 ($25k when grossed up by 1.17647) into commencing an account based pension for $81,250, would this trigger any excess contributions tax issues?

The ID states there are two members, so as per Regulation 292-25.01(4)(a) 5% of the other member accounts would also need to receive an allocation from the reserve to prevent the allocation from being considered a concessional contribution.

Could the remainder of what is left in the reserve then become part of the market linked pension and satisfy the exclusion under reg 292-25.01(4)(b)? Or is it an all or nothing approach?

Thanks Brian.
Kris Kitto

Brian Bendzulla


Thanks for the comments and points raised.

There can be many types of reserves and how they are used. The conversion of a complying lifetime pension is focused on an individual and using some or all of the "pension reserve" to set up a market linked pension.

The 5% question you raise is something not covered in that particular ATO ID but an important option for the use of reserves. Basically we could say that all amounts distributed from reserves are counted as concessional contributions with very limited exceptions. The 5% distribution has to be allocated in a "fair and reasonable manner' to the account of EVERY MEMBER of the fund (or class of members). It's the one option we have that is useful when members are too old to have contribution caps.

I tend to think of it as an crediting rate augmentation. The fair and reasonable was specified in a NTLG Super Sub Group in Sept 2009 as in proportion to account balances.

I do appreciate that the member with the complying lifetime pension might regard the reserve as his/her money - which it is not. They might not be too happy that this other path for using surplus reserves ends up to the benefit of all members of the fund.


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