I am the sole member of a SMSF reaching the preservation age in April 2021. On reaching the preservation age I intend to retire.
The Fund holds a substantial sum of cash on hand earning very little return which exists to both:
- fund retirement income payments in the near term, and
- invest in suitable assets as the opportunity presents itself.
These funds are on deposit at the same bank I have a housing mortgage with. The total cash on deposit is held in two accounts and presently exceeds the mortgage.
I don't want to withdraw a lump sum to discharge the mortgage because at some point in the future my wife and I will downsize. At that point the mortgage will be discharged.
From the Retirement Date I will be withdrawing a pension stream from the SMSF to meet living expenses. A significant portion of living expenses is the interest component of the monthly mortgage repayment of about $1350.
I can reduce the monthly pension drawn from the Fund by about $1350 by forgoing the monthly interest earned on the cash ($9/month) through use of a mortgage offset facility.
To the extent the Fund does hold cash, it is clearly beneficial to my ongoing retirement benefits to reduce the pension withdrawals from the Fund leaving a greater balance available for future retirement benefits.
I have concluded that a mortgage offset arrangement does meet the 'sole purpose test' of solely providing retirement benefits to fund members.
However, after a day of searching, I could find nothing that supports or erodes that conclusion. Have I missed something?
Kind regards
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