SuperConcepts has moved to dispel certain misconceptions it has identified as being held by financial advisers and SMSF trustees about the new superannuation reforms in a technical paper.
The first of these is the belief superannuation benefits transferred from retirement phase to accumulation phase cannot be drawn down from an SMSF.
SuperConcepts SMSF technical and private wealth executive manager Graeme Colley said: “Any amount used to provide an account-based pension must have met a condition of release of retirement after reaching the person’s preservation age or age 65, whichever is the earlier.
“Meeting either of these conditions of release means that the benefits are totally non-preserved and can be withdrawn from superannuation at any time.”
The second misunderstanding SuperConcepts has recognised is the notion that a minimum percentage amount of a member’s accumulation balance must be drawn down every year.
Colley said this idea is untrue because a minimum set percentage amount that is required to be withdrawn from an SMSF each year only applies to account-based pensions and transition-to-retirement pensions. The percentage is determined by the account balances on commencement or at 1 July each year.
The misapprehension that only one pension can be paid from an SMSF after 1 July is another false belief the sector service provider has noted stemming from the super reforms.
Colley pointed out there is no limit to the number of pensions that can be paid out to a member from an SMSF.
“A person may have a number of valid reasons for commencing more than one pension, which may be due to the manner in which contributions were made to the fund, changes in the pension rules or use of pensions to gain the greatest taxation advantage,” he said.
A fourth myth SuperConcepts has addressed regarding the new superannuation legislation is the thought that any pension balance has to be brought back to a value of $1.6 million every year.
In response to this idea, Colley emphasised investment gains or losses do not impact on the transfer balance cap and neither does the withdrawal of regular pension payments, meaning fluctuation in the threshold amount can occur.
“The value of the relevant pension measured against a person’s transfer balance cap occurs at the time an account-based pension commences from 1 July 2017 or on the amount supporting account-based pensions on 30 June 2017,” he said.
The final misconception SuperConcepts acknowledged is the belief a person can only have a maximum amount of $1.6 million in their SMSF.
Colley said there is no imposed limit on the amount of money a person can hold in a superannuation fund.
However, he did clarify the $1.6 million cap applies such that the value of assets supporting a pension cannot exceed this amount and if an individual has more than $1.6 million of assets in their SMSF, they will no longer be eligible to make non-concessional contributions to the fund.
