The SMSF Association has welcomed a new law that will allow the partial commutation of legacy pensions.
The change was announced in the federal government's mid-year economic and fiscal outlook (MYEFO), which was released last December.
Retirees with legacy products, who were previously unable to commute amounts exceeding their transfer balance cap, will be able to undertake a partial commutation.
"It also ensures appropriate tax outcomes for these retirees given their prior inability to comply with the TBC rules," MYEFO documents show.
"The government is amending the law to ensure that retirees who have commuted and restarted certain market-linked pension, life expectancy pension and similar products are treated appropriately under the transfer balance cap."
SMSFA deputy chief executive and director of policy and education Peter Burgess said the change will be appreciated by a minority of SMSFs affected.
"[We]don't believe the TBC rules work effectively in situations where a lifetime or life expectancy complying pension is converted to a market-linked income stream and the commencement value of the market-linked pension exceeds the member's TBC."
The SMSFA highlighted several inequities still exist in the need to retrospectively apply a new commutation formula to market-linked incomes streams that have been commuted and restarted on or after 1 July 2017.
"We are concerned that the need to re-report a commutation figure using this new formula could give rise to excess pension balances with excess transfer balance earnings accruing from the original date of the commutation," Burgess said.
"This may be the case because the revised commutation figure using the new legislated formula could give rise to a substantially lower TBC debit than originally reported using guidance material available at the time. It's also not clear how re-reporting could occur if the SMSF has subsequently been wound up."