SMSF members drawing a pension have been reminded they have only a few days in which to ensure the minimum payment has been made to the correct bank account, but can use an ‘extension facility’ unique to these types of funds.
SuperCentral self-managed superannuation executive consultant Michael Hallinan said SMSF members receiving a pension had to ensure the minimum amount was paid on or before 30 June into their personal bank account and should not rely on an ATO concession for underpayments.
“While there is an administrative concession provided by the ATO for inadvertent underpayment of the required pension amount, it is far better to avoid having to rely on this concession,” Hallinan said.
He noted any underpayment must be inadvertent, but could also not exceed one-twelfth of the normal pension payment, with the ATO offering little room for regular underpayments.
“The concession is not an informal grant of a right to be tardy in pension payments,” he said.
“Generally, the concession can only be used once. If the concession is used a second time, the ATO will have to approve the use of the concession.”
SMSF Alliance principal David Busoli said SMSF trustees that had yet to make a contribution or pension payment were unlikely to have those completed by 30 June if they were electronically initiated this week, but could use a promissory note to back a bank transfer that occurred after that date.
“A contribution can be made by supplying the fund trustees with a promissory note dated no later than 30 June and cashed in the first week of July,” Busoli said.
“Pensions may also be paid by the fund issuing a promissory note to the member dated no later than 30 June. To be acceptable, the fund will need to have sufficient cash to cover it on issue and it must be cashed within a few days.”
Hallinan noted failure to take action to ensure the minimum payment was made would change the nature and tax status of the fund.
“The consequence of the failure to satisfy the minimum payment rule is that the superannuation account supporting the pension will be treated as not being in retirement phase, thereby incurring more tax for the superannuation fund and thereby reduced earnings for the affected member.”
