Self-managed super funds paying pensions · 2018. 5. 22. · Self-managed super funds paying pensions ato.gov.au ECPI – TRIS exceeding the maximum Maximum pension limit set at 10%

Self-managed super funds paying

pensions

December 2014 update

Presented by

Australian Taxation Office

Self-managed super funds paying pensions ato.gov.au

How to participate today


Contents

Commencing a pension

Running a pension

Claiming relevant tax exemption

Common issues


Introduction

Superannuation Income Stream = Pension

TR 2013/5

Important points to note:

Condition of release

Trust deed

Liquidity needs

Account based pensions


Statistics

Approximately 39% of SMSF members receiving

pension payments

Pension payments are worth $19.1 billion

Expect a further 250,000 members eligible to receive a

pension sometime in the next 10 years


Commencing a pension

Things to consider before starting to pay a pension

All pension capital must be in the fund

Value pension assets at market value (QC 26343)

Create a separate interest

Ensure all paperwork, including PAYGW is in order


Running a pension

Requirements for an account based pension

Minimum amount must be paid (QC 39769)

Only transferrable on death

Cannot use capital value as security for a borrowing


Running a pension

Additional requirements for a TRIS

Minimum and maximum payment limit (QC 42388)

Limits on the ability to access lump sum benefits

No ECPI if pension standards not met


Exempt Current Pension Income (ECPI)

ECPI exemption does not apply to:

Assessable contributions

Non arms length income

Income from reserves not supporting pension liabilities

Calculating ECPI (QC 21546)

Segregated method

Unsegregated method


ECPI - Segregation method

Need to identify and set aside selected assets

The income generated from these assets is exempt

Points of interest:

Still need to apportion where there is a part year pension

Single bank account can be acceptable (TD 2014/7)

ATO treats assets as ‘segregated” where pension

account balances = market value of fund’s total assets


ECPI - Unsegregated method

Only a portion of the fund’s total income is exempt

Need an actuarial certificate

Actuarial certificate must be obtained every year

BEFORE a fund lodges a return


ECPI - Claiming fund expenses

General rule – no deduction for expenditure incurred in

gaining or producing exempt income

Apportionment required where fund has both

accumulation and pension members.

Exception if specific deduction provision applies


ECPI - Claiming losses

Income tax losses are reduced by net ECPI

Net ECPI equals ECPI less any expenses incurred in

deriving ECPI

ECPI can only be reduced to nil

For more info QC 21546


ECPI - Capital Gains and Losses

Segregated method

Disregard

Unsegregated method

Calculate capital gain or loss

Add net capital gains to fund’s assessable income

Any net capital gain is exempt as determined by actuary

Any capital losses carried forward


Poll

Bob retires at 62 but is seeking gainful employment. What pension can he

start in the meantime?

a) A transition to retirement income stream

b) An account based pension

c) Either of the above

d) None of the above


ECPI - Death of a pension member

No auto reversionary beneficiary

Pension stops

Fund can claim ECPI until death benefits are dealt with

No need to pay the minimum pension in year of death

Auto reversionary beneficiary

Pension does not stop

Must pay minimum pension amount in year of death


ECPI – Partial Commutations

Pension continues

Commutation lump sum counts towards the minimum -

SMSFD 2013/2

Can be an in-specie payment

Must retain sufficient monies to cover remaining

minimum pension payments that year

*** Be careful when commuting from a TRIS ***


ECPI – Full commutations

Pension stops

Fund’s eligibility for ECPI ceases

Commutation lump sums don’t count towards the minimum

Must make minimum pension payment before commutation

Tax components of commutation amount:

Retained if taken as a lump sum

Retained if rolled over to another fund

Recalculated if retained in the SMSF


ECPI – Fail minimum pension payment

Pension ceases from the start of the year

No entitlement to ECPI for the year

All payments received in the year treated as lump sums

ATO limited circumstances to allow pension to continue



ECPI – Timing of pension payment

By 30 June payments must be “cashed” i.e. paid:

member receives an amount; and

member’s pension account is reduced

Cannot accrue for the payment of a pension

Make sure there are sufficient funds to cover payments



ECPI – TRIS exceeding the maximum

Maximum pension limit set at 10%. If exceeded:

Pension ceases from the start of the year

No entitlement to ECPI for the year

All payments received in the year treated as lump sums

The entire payment is taxed as early access

There is no ATO exception for exceeding the maximum


ECPI – Restructuring pensions

Pre 1 July 2007 allocated pensions

TRIS and retirement

Pre 1 July 2007 legacy pensions


Questions

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© Australian Taxation Office for the Commonwealth of Australia, 2014

This presentation was current in November 2014

Documents

Self-managed super funds paying pensions · 2018. 5. 22. · Self-managed super funds paying pensions ato.gov.au ECPI – TRIS exceeding the maximum Maximum pension limit set at 10%