There have been significant changes with the super reforms from 1 July 2017 that have impacted the treatment of partial commutations from a superannuation income stream, including:
- The repeal of Regulation 995.1.03 of the ITAR 1997 that allowed for a member to elect to treat amounts as a lump sum for income tax purposes (applied to both TRISs and Account Based Pensions); and
- Changes to SIS Regulation 1.07D that ensures that amounts from a partial commutation are to no longer count towards a member’s minimum pension obligations for an income year.
Both of these measures were popular tools to utilise in the payment of benefits from income streams, as:
- For members under 60 years of age – they allowed for a member to have benefits taxed as lump sums, utilising their low rate cap; and
- For all pension paying members – the ability to make the Reg 995 election provided the ability to for payments to be made ‘in-specie’ (i.e. transferring assets), with these amounts counting towards a member’s minimum pension obligation – effectively making in-specie pension payments (see SMSFD 2013/2)
From 1 July 2017, both of the above strategies are no longer available.
SMSF document update – post reforms
As a result, we have updated the process for ordering partial commutation documents that reflect where such an order relates to:
- a pre 1 July 2017 partial commutation – where the Reg 995.1.03 election can/has been made, the amount counting towards the minimum pension and commutation choice for cash payment, in-specie payment or roll back to accumulation phase;
- or post 30 June 2017 (super reforms) partial commutation – where the amount no longer counts towards the minimum pension and the commutation choice is restricted to cash payments or roll back to accumulation phase.
Access to create SMSF documents
Please note that the partial commutation documents are available for use by gold and silver members as part of your monthly subscription, or alternatively can be purchased on a pay-as-you-go (PAYG) basis.