If the minimum pension payments are not met during the financial year, the member's pension account will need to be commuted.
This article looks at how to commute the pension and ensure the TBAR event is reported correctly.
For income tax purposes, the commutation will occur at the start of the financial year in which the minimum pension payments were not met.
For TBAR purposes, the value of the commutation is the balance of the member's pension account at the end of the financial year in which the minimum pension payments were not met.
Instructions for Simple Fund 360
Complete the following steps to commute the pension account and ensure that the commutation event is reported correctly for TBAR purposes:
- Determine the member's pension account balance at year-end. This is done by taking note of the member's pension balance after the year-end create entries process.
- Reverse entries until 1 July of the income year.
- Commute the member's pension account on 1 July of that income year. This will convert the member's account from pension phase to accumulation phase as the member is no longer entitled to claim ECPI for that particular financial year.
- Edit the TBAR event in the Transfer Balance Dashboard to have a debit amount of the amount noted in step 1.
If required, existing pension payment journals (41600) may be coded instead to Benefits Paid (Lump Sum Payments) 46000 after converting the pension account to accumulation