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Re: Overpayment of pension

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My super fund misunderstood instructions and paid me the full 4% minimum annual pension payment at the start of the new financial year rather than the end as I usually receive it.

I began a SMSF a fortnight later and rolled all super funds into it before placing it into pension mode.

Am I now required to pay an additional 4% as pension payment from the SMSF in this financial year, or can the 4% already paid me be used as a credit towards meeting the minimal pension rules?

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Devotee

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Hi John27

 

The SMSF will need to also make the minimum pension payment.

 

The minimum pension payment applies to each pension account separately, not to all accounts of an individual.

 

Eg if someone aged 65 has two accounts in an SMSF, each with a balance of $500,000 as at 1 July, at least $25,000 ($500k x 5%) must be paid from each account for both accounts to satisfy the minimum pension requirement. You can't pay $50,000 from the first account and treat both accounts as being in pension phase.

 

Not that it's much consolation, but the minimum required payment will be slightly less than 4% given that the pension account in your SMSF didn't exist until part way through the financial year. If the pension started 30 days into the financial year the minimum percentage will be (335 / 365) x 4%, or about 3.7%.

 

As you're under age 65 there wouldn't generally be any restriction on you making a personal contribution to your SMSF. So if the 4% paid by your super fund is still in your bank account you can contribute it to your SMSF and undo the mistake.

 

You can't contribute to a pension account. You'd need to contribute to a separate accumulation phase account in your SMSF. If you like you can then stop your pension, combine the two amounts and restart your pension.

 

Note that you can't make a personal contribution if your total super balance as at 30 June 2017 was above $1.6m, or if you've already made $460,000 in personal contributions in the 2015-16 to 2017-18 years.

 

Here's a link to the ato.gov.au page that explains the minimum pension rules.

 

And if you're interested, here's a link to the relevant bit of law for the minimum pension payment.

 

This is my personal view; I’m an ATO employee who chooses to help out here in my own time.

2 REPLIES 2

Best answer

ATO Certified

Devotee

Replies 1

Hi John27

 

The SMSF will need to also make the minimum pension payment.

 

The minimum pension payment applies to each pension account separately, not to all accounts of an individual.

 

Eg if someone aged 65 has two accounts in an SMSF, each with a balance of $500,000 as at 1 July, at least $25,000 ($500k x 5%) must be paid from each account for both accounts to satisfy the minimum pension requirement. You can't pay $50,000 from the first account and treat both accounts as being in pension phase.

 

Not that it's much consolation, but the minimum required payment will be slightly less than 4% given that the pension account in your SMSF didn't exist until part way through the financial year. If the pension started 30 days into the financial year the minimum percentage will be (335 / 365) x 4%, or about 3.7%.

 

As you're under age 65 there wouldn't generally be any restriction on you making a personal contribution to your SMSF. So if the 4% paid by your super fund is still in your bank account you can contribute it to your SMSF and undo the mistake.

 

You can't contribute to a pension account. You'd need to contribute to a separate accumulation phase account in your SMSF. If you like you can then stop your pension, combine the two amounts and restart your pension.

 

Note that you can't make a personal contribution if your total super balance as at 30 June 2017 was above $1.6m, or if you've already made $460,000 in personal contributions in the 2015-16 to 2017-18 years.

 

Here's a link to the ato.gov.au page that explains the minimum pension rules.

 

And if you're interested, here's a link to the relevant bit of law for the minimum pension payment.

 

This is my personal view; I’m an ATO employee who chooses to help out here in my own time.

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Devotee

Replies 0

One small correction:

 

Given the change in the non-concessional contribution cap, the cap over the three years 2015-16 to 2017-18 is now $460,000 rather than $540,000. ($180,000 in 2015-16 and 2016-17, and $100,000 in 2017-18).

 

So if you've already contributed $460,000 or more in 2015-16 and 2016-17 you won't be able to make any additional personal contributions in 2017-18.

 

This is my personal view; I’m an ATO employee who chooses to help out here in my own time.

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