PCG 2017/5 – SMSFs, 2016 Budget changes and commutation requests: what you must do by 1 July 2017

One major consequence of the 2016 Budget changes and the introduction of transfer balance caps is that, by the end of 30 June 2017, the total amount each member has in pension phase must be reduced to $1.6 million.

The ATO has released PCG 2017/5 to outline its requirements to effectively commute these excess amounts. Advisers must take these guidelines into account when preparing the paperwork for clients with pension balances over $1.6 million.

To effectively commute the excess, the ATO, in PCG 2017/5, states there must be a written request by the member and acceptance by the trustee that:

• is made before 1 July 2017;
• specifies how the commutation amount is calculated (the ATO acknowledges that it may not be possible to know the precise amount, so it can be the amount over the member's transfer balance cap);