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Date of article: 22 February 2013
Last updated: 22 February 2013

ECPI concession where minimum pension payments not met

The Australian Taxation Office (ATO) recently provided guidance on circumstances that may allow a SMSF to continue a superannuation income stream and continue to claim Exempt Current Pension Income (ECPI), even though the minimum pension requirements under SIS Regulations are not met.

The ATO takes the view that if an SMSF fails to meet the minimum penion payment requirements in a year, the superannuation income stream will have been taken to have ceased at the beginning of the financial year for income tax purposes. This means that the fund will not be entitled to treat income or capital gains as ECPI for the year. See tax ruling, TR2011/D3.

However, the Commissioner will exercise powers of general administration (GPA) to allow an SMSF to continue to claim ECPI, even though the minimum pension payments to a member are less than the minimum payment amount for a superannuation income stream, where the following conditions are satisfied:

1. The trustee failed to pay the minimum pension amount in that income year because of either:

  • an honest mistake made by the trustee resulting in a underpayment not exceeding one-twelfth of the minimum payment amount for a super income stream in the relevant year.
  • matters outside the control of the trustee.

2. Upon the trustee becoming aware that the minimum payment amount was not met for an income year, the trustee makes a catch-up payment as soon as practicable in the following (current) income year; or treats a payment (intended prior year payment) made in the current income year, as being made in that prior income year.

The Commissioner considers 'as soon as practicable' to be within 28 days.

The Australian Taxation Office will allow trustee to self assess and apply with GPA concession.

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