The ATO said this would depend on the terms of the account-based pension, the fund’s deed or the governing rules and any other restrictions imposed by the law, he said.

“So it wasn’t a blanket no or a blanket yes. Their view was that it depended on the terms of the pension, the fund’s deed or the governing rules, so it could be possible,” he explained.

However following the release of LCG 2017/3 Mr Figot said added confusion to the issue, with the law companion guide stating “that a binding death benefit nomination, by itself, does not make an income stream reversionary”.

The ATO said in the guide that “if the governing rules or the agreement standards under which the superannuation income stream is provided does not expressly provide for reversion then a binding death benefit nomination cannot alter this”.

It also stressed in the guide that “the binding death benefit nomination may have the effect of directing the superannuation provider as to whom the death benefit is to be paid and the form, but it cannot turn a non-reversionary superannuation income stream into a reversionary superannuation income stream”, said Mr Figot.

“So the ATO told us five years ago, you can change it, but now they've said, you can't do it by way of binding death benefit nomination” he said.

Given the ATO’s latest commentary on this issue, Mr Figot said SMSF practitioners and their clients may be best to convert a non-reversionary pension into a reversionary income stream through structures other than a binding death benefit nomination.

“Honestly it’s probably best not to structure it as a BDBN, but some other kind of document,” said Mr Figot.

It may be possible to achieve this by expressly allowing for this in the deed. The deed, he said, could expressly say that a pension can be made reversionary mid-stream without having to go through the process of having to stop and start a new pension.

There are mechanisms that can be included in the deed to enliven this in a number of ways. It can be drafted in a way he said, that doesn’t go against the ATO’s views in LCG 2017/3.