An SMSF technical specialist has reminded advisers and trustees of the need to take into account any pay-as-you-go (PAYG) withholding tax obligations when looking to draw down the maximum payment allowable from a transition-to-retirement income stream (TRIS).
“A TRIS payment to members under age 60 at the time of receipt, and who have a taxable [superannuation] component, will have PAYG withholding obligations,” Accurium principal Melanie Dunn told attendees of the organisation’s TechHub webinar held today.
“Importantly and something that trips people up is that PAYG withholding amount in the 10 per cent maximum [drawdown amount applying to a pre-retirement TRIS].”
A recipient of a non-retirement-phase TRIS can only withdraw 10 per cent of the starting balance of the pension at the previous 1 July.
“So if I had [a TRIS to the value of] $600,000 [at 1 July] and my 10 per cent maximum was $60,000, that doesn’t necessarily mean I can just pay out $60,000,” Dunn noted.
“[Instead] I need to take into account the PAYG withholding obligation and that must be included as part of the payment that counts toward that 10 per cent limit.”
According to Dunn, when an SMSF supporting a pre-retirement TRIS has a PAYG withholding tax obligation, several steps need to be followed to satisfy this requirement.
“[Firstly] the SMSF needs to register for PAYG withholding. We need to obtain the TFN (tax file number) declaration from the member and withhold an amount per schedule 13 from the tax tables for super income streams,” she said.
“We need to pay that withheld amount to the tax office and issue a PAYG payment summary to the member and lodge the PAYG withholding summary statement with the ATO.
“So there is a little bit of additional work there to manage payments where we’ve got members under age 60 [who have a TRIS] with a taxable component, but it is important to make sure we do follow those steps where there are these PAYG withholding obligations.”
