Without a commutation authority, the pension will not be able to be commuted.

A commutation can only occur after the ATO has issued a commutation authority to the fund.

This occurs after the member has been issued with an excess transfer balance determination by the ATO.

It won’t happen until 60 days has passed as this is a legislative requirement that allows time for the member to make an election.

The ATO may issue a commutation authority within a reasonable time after the 60 days has elapsed. This may be a further 28 to 30 days.

It may take longer, if either the TBAR or determination is amended, an objection is lodged, or the member has elected to extend the election due date in the default commutation notice.

On 5 April 2022, new super regulations took effect to allow members of SMSFs with post-1-July-2017 restructured market-linked pensions (also known as term allocated pensions), to remove any excess transfer balance amounts.

These changes impact all SMSF members who, on 1 July 2017 had a complying life expectancy pension or market-linked pension and opt to commute anytime thereafter, to start a new market-linked pension.

Market-linked pensions commenced on or after 1 July 2017 are not regarded as capped defined benefit income streams for transfer balance cap purposes.

This results in a difference between the special value debit on commutation of the original complying life expectancy or market-linked pension and the credit that arises when the new market-linked pension starts, which is based on the pension account balance. Where the credit is greater than the debit, the start of a new market linked pension will lead to an excess transfer balance amount.

Prior to the registration of the new SIS regulations, there was no ability to commute any excess amount from a restructured market-linked pension and individuals found themselves in perpetual excess.