In-specie transfer of shares as a pension payment?

1 min read
14/10/14 12:24

Can a pension payment be paid with an in-specie transfer of shares or will this be considered a payment of a lump sum rather than a pension payment?

Answer

The current industry view is that pension payments should be paid in cash and not as in-specie payments.

The ATO has also suggested that pension payments should be paid in cash and this seems to also be the view of APRA.

Under part 6 of the SIS Regs, the term lump sum “includes an asset”. However, there is no similar definition stating that the term “pension payment” includes an asset. As a result, APRA has taken the view that a pension cannot be paid in-specie.

See Superannuation Circular No. I.C.2 Payment Standards for Regulated Superannuation Funds.

However, having said that, there may be some scope for a lump sum payment to be used to meet the minimum pension payment (standard) required - and this could be via an in-specie payment form of pension.

This would effectively be a partial commutation (not a full commutation).  In addition, the lump sum payment, can only be paid when the member has met a condition of release with nil cashing restrictions.

Note that an election under Reg 995-1.03 to class the payment as a lump sum must be made at or before the payment is made.

It would be a good idea to have other cash payments of pensions paid during the year (and not just a single in-specie payment) , as it is our understanding that the ATO generally does not like the arrangement where the only pension paid is as a single lump sum/in-specie payment. 

The help desk is the ultimate back up support for busy practices. Knowledge Shop membership gives your team access to help desk support in tax, business services, superannuation, specialist areas and practice management. Take a tour of the Knowledge Shop service or call Julie on 1800 800 232.

Describe your image

Get Email Notifications

No Comments Yet

Let us know what you think