However, he said, on closer inspection, the implications of this change are “huge”.

“Firstly, note that although in May 2021 the federal budget said there would be flexibility for people to exit certain legacy pensions, what we are talking about now has nothing to do with that budget announcement. In fact, that budget announcement appears to have fallen by the wayside,” Figot said in a recent SMSF online workshop.

He continued that since 5 April 2022, the following is now allowable:

• Firstly, complying lifetime pensions (SISR reg 1.06(2)), MLPs and lifetime pension (SISR reg 1.06(7)) can be commuted and new MLPs commenced with ALL their pension monies (including all reserves). The new regulations don’t allow for this. Rather, this ability has existed for many years.
• Secondly, if the MLP is big enough, the new MLP will cause an excess transfer balance. Also, excess transfer balance earnings to start accruing.
• Thirdly, the ATO is alerted via TBAR. The ATO will then issue a determination. The determination allows the excess transfer balance amount (plus excess transfer balance earnings).
• Fourthly, you can then partially commute the new MLP by the amount in the determination and (among other options) return that determination amount to accumulation within the SMSF.

“However, it can be complicated. Firstly, the above is only very high level. There are lots of other considerations. For example, as the second step alludes to, this is only relevant for those with large balances,” Figot said.

“Also, under a restructure, the SMSF will almost certainly have less exempt current pension income. You’ll need to do some analysis to see if this is a big deal.”

Figot added that it is also important to remember the implications of the AFSL regime and social security implications.

“If your client is receiving some or all of the age pension and/or has a Commonwealth seniors health card, be very careful before implementing changes,” he said.

“For those for whom this could be relevant, tailored legal advice can be very important.”