Business News

Multiple pension strategy very compelling

Running multiple pensions within an SMSF, as opposed to commuting and restarting an existing pension, has significant tax advantages, according to an industry expert.

The SMSF Academy managing director Aaron Dunn told delegates at the 2013 Institute of Public Accountants National Congress to consider implementing a multiple pension strategy to guarantee the tax-free status of members in pension phase until the death of the member.

“I’m a big advocate for running multiple pensions because of the fact that when you commence an income stream, you lock in the tax-free and taxable proportions or as components become proportions,” Dunn told the conference being held on the Gold Coast.

“Those proportions therefore apply indefinitely to that income stream for its life. So if you are doing a contribution in or a recontribution of money, I would strongly suggest to start a second pension rather than consolidating it into the original pension because you effectively start it with a 100 per cent tax-free component and it will always stay at a 100 per cent tax-free proportion income stream.

“If your client is under 60, we have a tax efficiency because it means the pension has no assessable income for the individual.”

Running a strategy like this would also help achieve the estate planning outcomes members were seeking, he said.

However, he warned the attendees they could expect greater scrutiny from the Australian Taxation Office (ATO) around exempt current pension income deductions as implementation errors had already been detected.

“I was talking to [ATO assistant deputy commissioner for superannuation] Stuart Forsyth earlier, [and he told me] as part of their top 25 that they looked at in terms of targeted funds, they are finding even at the top end issues where the calculation of applying for exempt current pension income or the method that they used in terms of segregated and unsegregated assets isn’t being done correctly,” he said.

“And if we don’t do these things correctly, we’ll end up in a situation where the fund will be denied the tax deduction. And that’s the real driver as to why we obviously want to get that consolidation of wealth.”

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital