Self-managed super fund (SMSF) members in the pension phase need to ensure they have met their minimum pension payments by 30 June, warns the SMSF Association.
Association Chief Executive Officer John Maroney says with all the changes to superannuation being considered before 30 June, it would be understandable if SMSF members overlooked the compliance obligations as they relate to pension payments.
“Although it’s imperative SMSF members are across all the changes, we would urge them not to overlook withdrawing their minimum pension amount for the 2016-17 financial year. Alternatively, if they are in the transition-to-retirement phase they must take care not to exceed the maximum payment. If members are in any doubt they should get specialist advice.”
He says the legislation is quite clear. “If you don’t take your minimum pension, the assets supporting the pension account are deemed not be in retirement phase for the entire financial year, meaning it loses its tax exemption status.
“This means that earnings and capital gains of the fund will be taxed at 15% (or 10% for discount capital gains). For SMSFs realising significant capital gains in 2016-17, losing the tax exemption could significantly disrupt retirement strategies.
“Although the ATO has a very narrow exemption for funds with a very small underpayment, it is better to ensure that all obligations are properly met instead of needing to correct any mistakes.
“There is also the possibility of members losing all their entitlements to the transitional capital gains tax (CGT) relief the Government is offering to reset the cost base of the assets supporting pension accounts affected by the new transfer balance cap and transition to retirement pension rules.
“SMSF members also need to remember the importance of ensuring that all pension documentation is on file and appropriately signed.”
Maroney says the latest Australian Taxation Office figures show 48 per cent of SMSF members are in the pension phase, a figure that grew seven per cent in the five years to 30 June 2015, illustrating just how many SMSF members need to be aware of making their pension payments.
The minimum pension amount is calculated as a percentage of the pension balance on the date it begins or for continuing pensions its balance on 1 July of the current income year.
19 June 2017
Self Managed Super Fund Association