SMSF Association Media Release
The SMSF Association has lauded the Federal Government’s decision to fast track the implementation of a legacy pension amnesty.
SMSF Association CEO Peter Burgess says this is an early Christmas gift for over 17,000 SMSF legacy pension accounts that now have five years to commute their pension and take advantage of a flexible pathway to allocate associated reserve amounts.
“These newly registered regulations – Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024 – provide much-needed reform to retirees trapped in non-commutable legacy pensions, including legacy lifetime, life expectancy and market-linked income stream products.
“Considering the age of these superannuants, they now have a genuine opportunity to restructure their retirement savings effectively.”
Burgess says the decision to grant this amnesty is a tribute to the Association’s persistent lobbying on this issue over the past five years.
“These regulations represent a big win for the sector and the Association’s advocacy team, especially the decision to be make it a standalone policy priority and not be linked to other tax policies such as the proposed Division 296 tax.”
He says that while these regulations are a welcomed development, there is a lingering sense that some opportunities to further enhance the regulatory framework surrounding this measure may have been missed.
“In our submission on the draft regulations, we noted it was common practice for legacy pensions to cease rather than be commuted on the death of the primary beneficiary or on the completion of the payment term.
“We encouraged Treasury to consider the inclusion of an additional cap-free pathway to allow a pension reserve to be exited from the system where the pension recipient(s) has died.
“Unfortunately, this was not heeded so it appears an opportunity has been lost to quickly and efficiently eliminate these potentially large reserves.”
He adds that the Association also flagged the potential social security ramifications emanating from the regulatory changes.
“Notwithstanding industry’s recommendations for Treasury to work with the Department of Social Services to ensure these concerns were addressed, at this stage we’re not aware of any social security legislative instruments, or other supporting materials, that serve to alleviate any of these concerns.
“While we understand a legislative instrument to remove the social security ramifications is likely, without further clarification or developments on this front, concerns still linger that social security sensitive members may be negatively impacted by this recent development.”
These regulations, along with all other key legislative changes from 2024 impacting SMSFs, will be a feature of the SMSF Association National Conference 2025 next February. Held at the Melbourne Convention & Exhibition Centre from 19 – 21 February, attendees will hear the latest updates in depth from the experts. Click here for further details.