The SMSF Association has warned SMSFs with pensions to ensure that the minimum pension payments have been met by 30 June.
SMSF Association CEO John Maroney said, given all the changes around 30 June, it would be understandable if SMSF members overlooked the compliance obligations for 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,” he said.
“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.”
Maroney said the rules were quite clear: “If you don’t take your minimum pension, the assets supporting the pension account are deemed not be in retirement phase for the entire financial year, meaning it loses its tax exemption status.”
“This means that earnings and capital gains of the fund will be taxed at 15% (or 10% for discount capital gains). For SMSFs realising significant capital gains in 2016-17, losing the tax exemption could significantly disrupt retirement strategies.”
Maroney noted the ATO’s “very narrow” exemption for SMSFs with a very small underpayment, but said it was better to ensure that all obligations are met.
“There is also the possibility of members losing all their entitlements to the transitional capital gains tax (CGT) 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.”
“SMSF members also need to remember the importance of ensuring that all pension documentation is on file and appropriately signed,” Maroney said.