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Re: commuting an account based pension

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Devotee

Views 1986

Replies 19

On the ATO website Withdrawing-and-paying-tax it says;

 

Commutation

Commutation is the process of converting a super income stream into a super lump sum.

If the rules of your fund allow, you can fully or partially commute your income stream to:

  • stop or change the amount of your income stream
  • purchase another income stream
  • take a lump sum benefit in cash
  • rollover the amount back into the super system.

 

My question is .........   If I commute my pension to purchase another income stream I beleive that my account based pension is commuted back to my acculation account and new I can commence my new pension .. is this correct ??  

 

 

19 REPLIES 19

Devotee Registered Tax Practitioner

Replies 18

Yes, but make sure the pro-rata annual minimumpension is paid first, and that more than one pension payment is paid between start date and finish date.

 

Also, think hard about why you want to do this  -  the fund is not limited to a single pension per member.

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Devotee

Replies 17

@Bruce4Tax

 

Thanks for your response Bruce,

 

just wondering why you say more than one pension payment, when the ATO under minimum pension standards states " you must pay a minimum amount at least annually" which to me means at least once ....

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Devotee Registered Tax Practitioner

Replies 16

SISA requires an "income stream" to be paid => more than a single payment during the lifetime of the pension.

 

Example 1 

 01/07/2016  start pension

31/05/2016   pay min pension as a single payment

30/04/2017   pay min pension as a single payment

30/06/2017   stop pension.                                              That is an income stream.

 

Example 2

01/07/2016  start pension

31/05/2016  pay min pension as a single payment

30/06/2016  stop pension.                                                  That is not an income stream.

 

 

 

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Devotee

Replies 0

thanks for the clarification Bruce 

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Devotee

Replies 14

@Bruce4Tax

 

If I had a number of pensions say 2 tax free pensions and 2 taxable pensions, instead of having 4 seperate bank accounts and 4 seperate term deposits for these pensions can I have 1 bank account (and 1 term deposit )for both tax free pensions  and 1 bank account (and 1 term deposit ) for the taxable pensions from which to invest and make pension payments from. ??  

 

Taking it one step further if I can have 1 bank account for the tax free pensions, can I then make a single pension payment for the total of the 2 pension payments that are needed to be made, and have appropriate minutes / resolutions detailing what the break down of the payment is.  (just to save the hassle of having to make two seperate payments) ??

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Devotee Registered Tax Practitioner

Replies 13

The fund does not need separate bank accounts and investments for each pension, or each member.

 

A single payment can be allocated to more than one pension account.

 

The financial statement will show the correct allocations of income, expenses, tax, pension payments, etc for each member account.

 

The fund auditor will need to be satisfied that the fund's accounting has been done correctly - that is why we use specialised SMSF software.

 

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Anonymous

Replies 0

Hi everyone, what Bruce has stated is in line with TD2014/7 in particular examples 1 and 6.

Pension assets can be pooled together into one bank account and term deposit, even pensions from different members, so long as proper records are maintained.   

 

I did not know that you could make a single pension payment to a member for more than one pension and then allocate the different pension amounts to the relevant pensions, I guess it comes down to maintaining proper records again.

 

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Devotee

Replies 11

Slightly different question for you here Bruce,

 

just picked up that my prior taxagent had reported my smsf member number incorrectly on my members statements when they lodged smsf rtn in prior years, if they update the information in latest smsf return to reflect correct member number will that just bring everything up to date or will I have to lodge amended smsf returns to correct the member number .... ???

 

or does any of this really matter ??

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Devotee Registered Tax Practitioner

Replies 10

will I have to lodge amended smsf returns to correct the member number .... ???

 

Whenever we move a fund from desktop to cloud software, the member account numbers all change anyway.

 

This may be an issue for TBAR forms, but there is no reason to amend prior year returns.