For example, the ATO bulletin states at paragraph 52 that an allocation cannot be made from the reserve to an existing account-based pension, he noted.

“Presumably this means where an SMSF only has account-based pensions and has a legacy reserve, say because the fund had an anti-detriment reserve, or reserves left over from an old defined benefit pension, the reserve can only be allocated to an accumulation account,” he said.

“As a result, the proceeds of the reserve will need to be retained in a taxed environment despite the SIS regulations allowing such an allocation to be made to an existing pension account.”

Rather than prohibiting such allocations, Mr Burgess said an alternative could be to amend the law so that such allocations would count as a credit to the member’s transfer balance account.