Superannuation, retirement and employment termination - 'Internal roll-over' or 'roll-back' of a superannuation pension within a superannuation fund

Is an internal roll-over, that is the stopping of a pension and returning to accumulation of savings within a superannuation fund, a roll-over of an eligible termination payment (ETP) as per subsection 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

No. An internal roll-over is not an ETP as per subsection 27A(1) of the ITAA 1936.

The taxpayer has a self-managed superannuation fund and is currently in receipt of a pension from the fund.

The taxpayer has returned to work and is now considering a roll-back (ie. internal roll-over) of his pension entitlements within the same superannuation fund. That is, he wishes to stop his pension and return to accumulation of savings within the superannuation fund, with the view to commencing a new pension from the fund at a later date.

'Roll-over' is defined in subsection 27A(1) of the Income Tax Assessment Act 1936 (ITAA1936) and means 'an application of section 27D in relation to an ETP'.

Section 27D of the ITAA 1936 may only be applied in relation to a 'qualifying eligible termination payment'. 'Qualifying eligible termination payment' is defined in subsection 27A(12) of the ITAA 1936. The definition is stated in part as follows; '... an eligible termination payment made in relation to a taxpayer is a qualifying eligible termination payment if, immediately after the eligible termination payment is made, an amount is: (a) paid into a complying superannuation fund...'

An 'internal roll-over' does not result in a payment from a superannuation fund and as such an ETP does not arise. The Commissioner has no discretion to treat an 'internal roll-over' as the roll-over of an ETP.

Sections 140M and 140Q of the ITAA 1936 set down superannuation and kindred benefits which must be reported for Reasonable Benefit Limits (RBLs) purposes. These are limited to certain ETPs, superannuation pensions, and annuities.

As an 'internal roll-over' does not result in the payment or rollover of an ETP, it is not a reportable event for RBL purposes. This may result in the full or partial loss of the superannuation pension rebate in respect of the new pension when it is commenced, as both the RBL value of the original pension and the new pension will be counted towards the RBLs of the recipient, and there will be no reduction of the value of the original pension under section 140ZP of the ITAA 1936.