Estate Planning

Pensions in new super world require digging

SMSF practitioners will need to consider clients’ estate planning needs at pension establishment more closely and continue to monitor them, as pensions have an important role within SMSF planning in the new super landscape, a technical expert has said.

“A lot of us have clients with multiple pensions not for administrative ease – some would be – but more so for estate planning purposes and that’s pretty vital when there’s a decision that we make from a commutation point of view because why were we doing this in the first place and are those reasons still legitimate?” Miller Super Solutions founder Tim Miller said at the Chartered Accountants Australia and New Zealand National SMSF Conference in Sydney last week.

“Given that the reason was distribution of wealth on death, you suspect that those reasons are still legitimate with regards to why you are transacting in a certain way.

“What’s the purpose and what are you trying to achieve with your pensions? You have to dig deep and find out some history about [your client] to determine what they’ve actually done.

“These are the sorts of things you needed to undertake before 30 June and they will now play out in the preparation of the financial year statements.”

Miller added the post 30 June reforms required practitioners to consider the issues associated with paying a pension more closely.

In particular, the rules around transition-to-retirement are different now with regards to the tax exemption for the fund, he said.

“So trustees need to be satisfied that they are undertaking a transition-to-retirement strategy for the purpose of supplementing their income more so than trying to obtain a tax benefit for the fund,” he noted.

“Similarly we now have to consider that partial commutations no longer count towards the minimum pension obligation but they do result in a debit to the transfer balance account so can be useful in instances where a member draws more than the minimum requirement.

“These issues plus managing clients transfer balance cap mean that pensions continue to play an important part in our SMSF planning.”

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