August 28, 2010
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WHEN a pension is paid by a super fund, the tax-free and taxable proportions used to start the pension are set for the time it is paid.
Q
I am over 55 and intend to work another four to five years before considering semi-retirement. I have $400,000 in a transition to retirement pension account and $50,000 in an accumulation account with an industry super fund. Recent changes to my employment conditions allow me to contribute to an approved fund and I would like to start an self-managed super fund. What are the best steps to roll over the TTR account and accumulation account into an SMSF?
A
The steps you take will depend on what benefits your TTR pension is made up of. If it is all taxable benefits, you would commute it back to accumulation phase and then roll over all funds into your SMSF and begin a new TTR. If your TTR has considerable tax-free benefits you should roll over your accumulation account first into your SMSF and then start a TTR pension from these funds. Then commute your current TTR, roll this mixture of taxable and tax-free benefits into your SMSF, and start a new TTR from these funds. By doing this you could run down your taxable pension first, leaving a larger balance in your pension made up of tax-free benefits.
Q
I am about to draw down on my Commonwealth super at the age of 60 and I am setting up a SMSF from a property sale. I will then be drawing two super pensions to a total of about $1700 a fortnight. Is that allowable?
A
There will be nothing stopping you drawing a pension from the Commonwealth super fund and from your SMSF.
Q
Our new SMSF has two members, one is receiving a TTR pension and the other is in accumulation phase. The members would like to take the path of segregating the assets to avoid the need to obtain an actuarial certificate. The idea would be to invest in shares and interest-earning products of their own choice because of different time horizons to retirement. Do we have to open separate share-trading accounts and separate cash-management accounts so that all aspects of administration of the SMSF is clean and tidy?
A
You would not necessarily need two share-trading accounts; you would only need to allocate each share purchased to the relevant member. It would be advisable to have two cash-management accounts where the income from each member is deposited, with the TTR pension cash management account paying the pension.
Q
I have a transition to retirement pension that cost $400,000 but sadly is now worth much less. I am 62 and my wife turns 64 this week and theoretically could be eligible for a part age pension. How do I know if my pension is reversionary?
A
A TTR pension will be reversionary if it has been documented as such. This means the member would have needed to request that the pension be reversionary and the trustees would have acknowledged this when setting it up.
Questions can be emailed to max@taxbiz.com.au
Self Managed Superannuation Funds: A Survival Guide, by Max Newnham, is available in bookstores.
From The Sydney Morning Herald published on August 28, 2010
