Latest News

‘Hefty penalties’ with TRIS payment failures, SMSFs warned

With clients who fail to pay the minimum pension payments for TRISs potentially up for illegal early release and significant penalties, SMSF practitioners have been urged to pay close attention in this area.

 

 

With failure to pay minimum pension payments for TRISs potentially resulting in illegal early release and significant penalties, SMSF practitioners have been urged to pay close attention to their clients’ pension payments.

Speaking in a webinar, DBA Lawyers director Daniel Butler said SMSF clients who have a transition to retirement income streams (TRISs) and have not yet retired can land themselves in serious trouble where they fail to meet the minimum pension payments.

Where a client fails to make the minimum pension payments, the pension ceases for that income year and the withdrawn amounts become a lump sum, he explained.

Typically, most TRISs contain preserved money only, and it is only possible for a member to take preserved money as a lump sum once the member has retired, he said.

“If it is preserved money then effectively you have an early release on your hands,” warned Mr Butler.

Therefore, unless the member has an unrestricted non-preserved amount, the fund has contravened a very important operating standard and the ATO could decide to “apply the full force of the law”, he cautioned.

“[Consequently], the client could get slammed with fully assessable income, even though the money from the TRIS was tax-free,” he said.

“Not only that, but they could potentially get an admin penalty of $4,200, so that’s a hefty penalty. If the client doesn’t have a corporate trustee, then that penalty amount could be doubled or tripled depending on the number of members in the fund.”

Mr Butler said it is vital therefore that SMSF practitioners stress to their clients the serious consequences that can arise from failing to make the minimum pension payments for their TRIS, especially where the client hasn’t retired. 

 

Miranda Brownlee
26 October 2018
smsfadviser.com

General advice warning: This website contains information that is general in nature. It does not take into account

the objectives, financial situation or needs of any particular person.You need to consider your financial situation

and needs before making any decisions based on this information.


PRPIA Pty Ltd ABN 61 144 888 433
Corporate Authorised Representative
Charter Financial Planning Limited ABN 35 002 976 294
Australian Financial Services Licensee Licence number 234665
Principal Address: Level 22 / 33 Alfred Street, Sydney, NSW 2000

Financial Services & Credit Guide | Peter Meakin | Luke Andrews | William Tunbridge |
Legal Disclaimer | Privacy Policy | Terms & Conditions