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SMSF Association issues pensions reminder

The SMSF Association has warned SMSF members in the pension phase to ensure they meet their minimum pension payments by 30 June.

SMSF Association chief executive John Maroney said that with all the superannuation changes being considered ahead of the 1 July commencement date, it would be understandable if SMSF members overlooked compliance obligations as they related 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,” Maroney said today.

“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 said the legislation was clear.

“If you don’t take your minimum pension, the assets supporting the pension account are deemed not to be in retirement phase for the entire financial year, meaning it loses its tax exemption status,” he noted.

“This means that earnings and capital gains of the fund will be taxed at 15 per cent, or 10 per cent for discount capital gains.

“For SMSFs realising significant capital gains in 2016/17, losing the tax exemption could significantly disrupt retirement strategies.”

He said although the ATO had a very narrow exemption for funds with a very small underpayment, it was better to ensure all obligations were 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 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,” he added.

“SMSF members also need to remember the importance of ensuring that all pension documentation is on file and appropriately signed.”

The latest ATO figures showed 48 per cent of SMSF members were in pension phase, a figure that grew 7 per cent in the five years to 30 June 2015, illustrating just how many SMSF members needed to be aware of making their pension payments, he said.

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.

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