Running multiple retirement income streams from an SMSF can be used as a strategy to avoid breaches of the minimum pension payment rules, but the trust deed must allow for different pensions to meet the payment requirements, a superannuation technical specialist has warned.
Colonial First State head of technical services Craig Day said the revisions to Taxation Ruling 2013/5 had prompted some advisers and their clients to consider the interaction of multiple pensions when drawn from an SMSF.
“I have had people say: ‘Do these changes mean we should run multiple pensions because if I fail one, I might have taken enough from one income stream to at least satisfy the minimum for another?’” Day told delegates at The Tax Institute National Superannuation Conference held in Sydney recently.
“Yes you can, unless you fail all of your pension minimums and had three pensions running and they are all taking monthly payments and now you have 36 lump sums to calculate, but yes, that would work.
“What I would then want is some sort of provision in the deed to allow me to allocate the pension payments to make sure that I have met at least one of the pension minimums.
“The reason for this is because if I diarise each pension payment that comes out and state it is for account-based pension number one, or for account-based pension number two, I have no ability to then say I want to take half of those pension payments from pension one and put them on pension two to make sure we met its minimum [payment].
“If you can’t do that, then the ATO might come back and say ‘sorry, you failed both’, so you might want something like that in your deed.”
Further Day repeated warnings about setting up any automatic pension renewal process documents to cease a failed pension, commute it and start a new income stream.
“I also get lots of questions about whether you can have a deed that auto stops your pension as soon as you fail the minimum without you knowing and starts a new pension without you knowing,” he indicated.
“I asked [DBA Lawyers principal] Dan [Butler] about this before and he just shook his head. There are apparently providers out there that have that paperwork. Whether it works or not, I have got some very big question marks about it.”
