It also contains a provision aimed at correcting an error in the way that market-linked pensions are valued under the transfer balance cap when they are commuted or rolled over, that results in a nil debit on the transfer balance account.

However, SuperConcepts executive of SMSF technical Mark Ellem said that the approach taken in the draft legislation may actually cause some to actually have an excess on their transfer balance account.

The Exposure Draft and Explanatory Materials, he explained, propose and describe a very different approach to calculating the debit value of a commutation of a market-linked pension from the example in the EM to the original bill.

Mr Ellem previously raised some concerns about how the commutation value of these pensions would be calculated when Assistant Treasurer Stuart Robert first announced that the government was working on a permanent legislative fix for the double counting issue with these pensions.

“The new approach, per the example in the Explanatory Materials to the Exposure Draft, when calculating the debit value for the commutation, takes into consideration pension payments made in the financial year preceding the year the commutation takes place and the pension payments in the year of commutation,” he said.

“This is at odds with the general approach of pension payment not having any effect on a person’s transfer balance account.”

Looking at the example in the Explanatory Materials involving Daniel, who is fully commuting his market-linked pension, Mr Ellem explained that applying the intent from the example in the previous EM for the original bill, the calculation for the transfer balance account balance will be $17,000 lower.

“[It’s] not a large amount in this example, but it will depend on the numbers for each case. This new approach to calculating the debit value of a pre-1 July 2017 market-linked pension commutation could mean a potential excess transfer balance amount for a member,” he cautioned.

“This new approach is to apply from 1 July 2017, so all the calculations of debit value for commutations of these market-linked pensions since 1 July 2017 that advisers, accountants and administrators have used, may be incorrect.”

Mr Ellem said that it will be interesting to know the ATO’s approach to debit value calculations that have already been done, particularly those that were reported under their practical compliance approach.

“I also have a concern about the interpretation of one aspect of the new approach and how it’s been applied in the Daniel example in the explanatory materials,” he said.

“The debit value is the original special value credit, reduced by any debit previously arisen, but is then further reduced by ‘the total amount of superannuation income stream benefits that you were entitled to receive from the income stream before the start of the financial year in which the commutation takes place’.”

In the Daniel example, he explained, this is the market-linked pension payments received in the financial year preceding the year in which the commutation occurs.

“However, my question is, how do you arrive at this figure given the wording of the relevant provision?” he questioned.

“Could it be interpreted as Daniel’s pension payments he’s entitled to for the remaining term of the market-linked pension? Hopefully, any ambiguity can be cleared up during the consultation period.”