What about transition to retirement pensions?

From 1 July 2017 these pensions will no longer be entitled to the earnings tax exemption.  Consequently, while these pensions remain in the “transition” phase the pension transfer cap is not relevant.

However as soon as the transition phase ceases (because the taxpayer has attained age 65, or has retired), the pension is now an ordinary account-based pension and the trustee paying the pension will have to report to the ATO the date the transition phase ceased and the pension account balance at that date.

In summary

• transition to retirement pension commenced before 1 July 2017 then

– if the transition phase ceases before 1 July 2017 - then the pension will be an ordinary account-based pension at 1 July 2017 and the account-balance at 30 June 2017 must be reported to the ATO; and

– if the transition phase ceases on or after 1 July 2017 - say for example on 30 September 2017 when the taxpayer attains age 60 - then the pension will be an ordinary account-based pension on  30 September 2017 and the pension balance account at 30 September 2017 must be reported to the ATO

• transition to retirement pension commenced after 30 June 2017 then

– at the time the transition to retirement pension commences - then as the pension is not entitled to the earnings tax exemption, it is not required to be reported; and

– at the time the transition to retirement pension ceases - say on the retirement of the taxpayer on 31 December 2017, then the pension will be an ordinary account-based pension on 31 December 2017 and the pension balance at 31 December 2017 must be reported to the ATO.