Deeming Clauses & Pension Payments

Recently, the issue has been raised that unless the governing rules of a super fund expressly set out the SIS Act pension standards (eg for account-based pensions or transition to retirement pensions) the pension will not qualify as a SIS Act pension and the paying fund will not be entitled to the tax exemption for pension income.

When preparing the first version of the SUPERCentral Governing Rules, our lawyers reproduced the pension rules at length in the Governing Rules.  This practice has continued in respect of each updated version of the Governing Rules and will continue in the future.

Our lawyers are of the view that on a strict reading of the SIS Act and the relevant regulations, the general rules applying to each type of pension should be included in the Governing Rules. 

However, we are not aware that the ATO would seek to challenge validity of a pension being paid from a self managed superannuation fund which does comply with the relevant pension standards merely because the relevant pension standards have not been set out at length in the governing rules.  There are various ways in which the terms of a pension can be documented: eg in the Governing Rules, in a pension agreement between the trustee and the member, or set out in trustee resolutions.

We consider the ATO would not take a pedantic view and would look to the substance of the arrangement.