After the legislative amendment to fix the issue was passed, the ATO issued a new alert, CRT Alert 031/2020, on 19 June 2020. The ATO advised that it would not take compliance action if funds did not report the required transfer balance account events of the commutation and/or the commencement of the new income stream. This was due to difficulties with reporting market-linked pension commutations where the term had expired, and a new pension had commenced.

Due to the delay in publishing its guidelines on calculating the value of the debit, the ATO advised in CRT 042/2020 that it wasn’t expecting any funds to begin to commence their retrospective reporting until November 2020 and that it would issue further guidance. On 6 September 2021, the ATO published updated guidance on market-linked pensions.

The ATO noted that Treasury has now released exposure draft law to amend the regulations to allow commutations of certain capped defined benefit income streams to occur to comply with commutation authorities and address excess transfer balance amounts.

“In anticipation of this regulation change, funds who support these products should now prepare their transfer balance cap reporting/re-reporting of any commutations that have not yet been submitted using the new calculation,” the ATO stated.

“The ATO expects that funds will start reporting the new income streams when the regulations commence to ensure that the period in which affected individuals accrue excess transfer balance tax liabilities begins on or after the commencement of the regulations. This will allow appropriate tax outcomes for these individuals given their prior inability to comply with the transfer cap rules.”

If the reporting is before the regulations commence, the ATO said members should contact the ATO if they receive a determination and request an extension of time to make an election.