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Questions & Answers – Withdrawing from your SMSF


+ When I commence a Pension, is there a Minimum Amount I must access?

Yes. You will be able to choose the amount you take as an SABP or a TRIS each year subject to a minimum percentage drawdown of your account balance depending on your age as follows:

Age Range Minimum Pension Factor
Under 65 4%
65 - 74 5%
75 - 79 6%
80 - 84 7%
85 - 89 9%
90 - 94 11%
95 or more 14%

In the Pension Commencement Year the percentage to be taken is applied to the Commencement Value of the Pension in that year (prorated if the Pension commenced part way during the year). Importantly each Financial Year the Pension Balance is recalculated on 1 July and the percentage is applied to the new balance on that date to determine the minimum amount that must be drawn in the relevant year. There is no maximum Pension Withdrawal that you can take for a Simple Account Based Pension. There is a maximum Pension Withdrawal amount of 10% of your Member Balance for a TRIS.

Example:

For example, assume your SMSF has total assets of $1,000,000. The SMSF has 2 Members, you and your Spouse. Your proportional ownership of the SMSF is 60% so your Super Benefit in the SMSF is $600,000. You decide to commence a Pension with your Super Benefit but your Spouse who has a balance in the SMSF of $400,000 does not commence a Pension as he/she is only aged 50.

Accordingly you apply to commence a Pension using the ESUPERFUND online Pension Application. You nominate a commencement date of 1 January 2020 and are 60 years of age at the date of the Pension commencement. In this case the minimum Pension you must take per annum is 4% or $24,000. However given that the Pension is being commenced halfway during the year then only half of the minimum pension payment must be accessed before 30 June 2020, that is $12,000.

On 1 July 2020, assume that the SMSF assets have increased to $1,100,000. Your 60% proportional interest in the SMSF will in turn increase to $660,000. In this case the minimum pension amount will be recalculated for the following year ending 30 June 2021 to 4% of $660,000 or $26,400. This amount must be accessed before 30 June 2021. The recalculation will continue to occur 1 July each year.

+ When I commence a Pension, is there a Maximum Amount I must access?

With a Simple Account Based Pension there is no maximum amount you need to take when you commence a Simple Account Based Pension. This means that can take all your Super Benefit as and when desired.

With a TRIS, the maximum annual pension drawdown for a TRIS is 10%.

+ How often is my Minimum Pension recalculated?

In the Pension Commencement Year the Minimum Pension is applied to the Commencement Value of the Pension in that year (prorated if the Pension commenced part way during the year). Importantly each Financial Year the Pension Balance is recalculated on 1 July and the percentage is applied to the new balance on that date to determine the minimum amount that must be drawn in the relevant year.

+ When can I begin to take my Minimum Pension Payment?

You can commence accessing your Minimum Pension Payment at any time after the Pension commencement date nominated in your Pension application. It does not matter if the Pension documentation has not been signed or returned to our office.

+ How often must I access my Pension payment?

Pension payments must be made to your personal Bank Account. You will need to arrange to transfer monies from your SMSF Bank Account to your personal Bank Account to evidence the Minimum Annual Pension Payment required. The transfer of monies can occur at any time and for any amount during the Financial Year as long as it exceeds the Minimum Pension Payment required. That is the nominated Pension payment can be paid either monthly, quarterly, half-yearly or on an annual basis, but must be paid at least annually.

+ Who arranges the Pension Payment?

You do. As the Trustee of your SMSF you will need to arrange the transfer of funds from the Transaction Bank Account to your personal Account to evidence the Pension. The transfer can be done in any way you desire. That is the transfer can be done by direct debit or on a case by case basis as you require money from the SMSF such as BPAY, EFT or cheque withdrawals. The main issue to bear in mind is that the Minimum Pension is accessed annually.

+ What Bank Account is my Pension Paid into?

Pension Payments must be made to a Personal Bank Account. You will need to arrange to transfer monies from your SMSF Bank Account to your Personal Bank Account to evidence the Minimum Annual Pension Payment required. The transfer of monies can occur at any time and for any amount during the Financial Year as long as it exceeds the Minimum Pension Payment required.

+ When I commence a Pension, do I have to set up a new separate Bank Account for my SMSF?

No. Only the existing Transaction Bank Account is required. The SABP or TRIS is tracked by ESUPERFUND when preparing your SMSF Annual Compliance requirements and is simply an Accounting Entry in your SMSF.

+ What if I do not withdraw the Minimum Pension Payment?

An SMSF must adhere to the Minimum Pension Payment rules. If a Member does not receive their Minimum Pension Payment for a particular financial year, the pension will be taken to have ceased at the start of that Financial Year. With a Pension in the Retirement Phase (SABP or R-TRIS), the tax free status of the SMSF income and realised capital gains may be at risk as the Member may not be considered to be in tax-free retirement Pension Phase. In addition one of the objectives of each SMSFs Investment Strategy is to have sufficient liquidity to meet all SMSF outgoings including Pension Payments. Accordingly to ensure that you do not breach the SMSF Investment Strategy and Pension Regulations you must ensure there is always sufficient liquidity to meet all Pension Payment requirements of the SMSF.

+ Does my SMSF have to prepare documentation to evidence my Pension withdrawals?

If you commence a Pension and are aged between Preservation Age and 59, the Pension Income you access must be declared in your personal Income Tax Return. To do this the SMSF must provide to each Member aged between Preservation Age and 59 PAYG documentation with the amounts that must be declared in your Tax Return and any rebates that may apply. The PAYG documentation including the calculation of the relevant amounts to include in your Tax Return are prepared by ESUPERFUND absolutely FREE of charge! It should be noted that no PAYG documentation is required for Pension withdrawals made after age 60 given that these withdrawals are tax free and do not need to be declared in your personal tax return.