A surprise inclusion in the Federal Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) could mean good news for recipients of certain non-commutable ‘legacy’ pensions.

The Government proposes to amend the law to ensure that retirees who have commuted and restarted certain market-linked pensions, life expectancy pensions and similar products are treated appropriately under the transfer balance cap. Historically, such pensions have been non-commutable, except under very limited circumstances. The legislative amendments will allow retirees to partially commute these pensions to the extent they result in a transfer balance excess for the pensioner.

While the MYEFO does not provide further detail on the proposed amendments, it appears that the amendments are designed to address the problem where a member commences a new market linked pension (MLP) upon the commutation of a complying lifetime pension, life expectancy pension or pre 1 July 2017 MLP, and the commencement value of the new MLP is more than the member’s personal transfer balance cap.

Under the current law, this issue can arise as MLPs commenced after 1 July 2017 do not meet the definition of a capped defined benefit income stream under the Income Tax Assessment Act 1997, and can therefore result in a transfer balance excess for the member.

To discuss or for further information please contact:

Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au

Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au