Issue
What happens to an allocated pension when additional undeducted contributions are made after the pension has started?
Decision
An increase in the undeducted purchase price of an allocated pension, by way of additional undeducted contributions, results in the cessation of the old pension and the start of a new pension.
The new allocated pension has to be reported for reasonable benefit limits (RBL) purposes.
Facts
The taxpayer receives an allocated pension from a self managed superannuation fund (SMSF).
The taxpayer made an additional undeducted contribution after the allocated pension commenced to be payable.
The SMSF is a complying superannuation fund that has commenced to pay an allocated pension.
The taxpayer, as at the date of the contribution was eligible to make the contribution into the SMSF under the minimum standards prescribed in the Superannuation Industry (Supervision) Regulations (SIS Regulations).
Reasons for Decision
An increase in the undeducted purchase price of an allocated pension, by way of additional undeducted contributions, results in the cessation of the old pension and the start of a new pension.
However, the cessation of the old pension does not involve a payment so does not qualify as a qualifying eligible termination payment under section 27D of the Income Tax Assessment Act 1936 (ITAA 1936) and will not be reported for RBL purposes under section 140Q of the ITAA 1936. No adjustment under 140ZP of the ITAA 1936 will be made. The new pension will be counted for RBL purposes.
The taxpayer was eligible to make a contribution into the SMSF pursuant to Part 7 of the SIS Regulations.