www.esuperfund.com.au

Member Accounts


 
 
Member Accumulation Account and Pension Account

It is important to understand that every Member has two accounts in a SMSF.  These Accounts are an "Accumulation Account" and a "Pension Account" (more about Pensions can be found here).  These accounts are simply "Accounting Accounts" and not actual physical bank accounts.  Accordingly whilst your actual Super Benefit will be invested in a range of assets including cash and shares, ESUPERFUND will allocate your Super Benefit between your "Accumulation Account" and a "Pension Account" in the accounting records of your SMSF. 

 
 
Allocating Contributions and Rollovers to the Member Accumulation and Pension Accounts

All contributions and rollovers made to your SMSF (via the Transaction Bank Account) will automatically be allocated to your "Accumulation Account".  When you commence a Pension in your SMSF, your Super Benefit is transferred from your "Accumulation Account" and recorded in your "Pension Account".  Unlike Retail Funds, after commencing a Pension a SMSF can continue to accept contributions (subject to the normal contributions rules) and rollovers.  These contributions and rollovers continue to be made to the Transaction Bank Account setup for your SMSF.  When you make additional contributions and rollovers to your SMSF these contributions and rollovers are allocated to your "Accumulation Account" even if you have commenced a Pension.  They cannot be added to your "Pension Account" directly. 

Example:

Barney is 56 & retired and commences an SMSF. He rolls over his Super Benefit from his current Superfund totalling $190,000. Barney's spouse Lisa is also a Member of the SMSF and she is not retired. Lisa makes a personal Non Concessional Contribution into the SMSF totalling $100,000. The rollover and contributions are made to the same Transaction Bank Account established for their SMSF by ESUPERFUND. An amount of $250,000 is in turn invested in shares and the balance of $40,000 is left in cash.

In the above example ESUPERFUND will allocate the rollover of $190,000 to Barney's Accumulation Account. Similarly ESUPERFUND will allocate the contribution made by Barney's Spouse Lisa of $100,000 to her Accumulation Account. Importantly these are "Accounting Entries" only. This means that the actual investments remain in cash and shares as detailed above.

Barney in turn decides to commence a Simple Account Based Pension (SABP) and he is still within his Transfer Balance Cap. In this case ESUPERFUND will transfer the balance from his Accumulation Account to his SABP Account. After the commencement of the SABP, Barney makes a personal contribution into the SMSF of $10,000 which Barney leaves in the Transaction Bank Account which now has a balance of $50,000. The personal contribution of $10,000 will be allocated to Barney's Accumulation Account. Lisa also decides to commence a Transition to Retirement Pension (TRAP) and the balance in her Accumulation Account is transferred to her TRAP Account. At that time the SMSF will look as follows:

 

SMSF Assets $
SMSF Shares $250,000
SMSF Cash $50,000
Total $300,000

 

Member Accounts $
Barney - SABP Account $190,000
Barney - Accumulation Account $10,000
Lisa - TRAP Account $100,000
Lisa - Accumulation Account $0
Total $300,000

 

 
 
Tracking Member Accumulation and Pension Accounts

ESUPERFUND tracks each Members "Accumulation Account" and "Pension Account" as part of the annual compliance process.  No action is requited from you.  ESUPERFUND will determine what portion of the SMSF belongs to each Member and in turn what portion of the Member Account belongs to each respective Members Accumulation and Pension Accounts on a proportional basis.  This percentage is constantly changing during the financial year and is tracked by ESUPERFUND.  Importantly as part of the annual compliance process ESUPERFUND will prepare a Member Statement for each Member of the SMSF.  This is a legal requirement.  The Member Statements are included in the annual compliance documents completed for clients and must be approved by you as the SMSF Trustee before lodgement with the ATO.

Example:

In our earlier example Barney has contributed $200,000 or 66% of the monies to the SMSF so he will own 66% of the SMSF assets. Barney's Spouse Lisa has contributed $100,000 to the SMSF or 33% of the monies so she will own 33% of the SMSF assets. Their Member Accounts are further tracked on a proportional basis as follows:

 

Member Accounts $ %
Barney - SABP Account $190,000 63.33%
Barney - Accumulation Account $10,000 3.33%
Lisa - TRAP Account $100,000 33.33%
Lisa - Accumulation Account $0 0%
Total $300,000 100.00%

 

 
 
Income and Realised Capital Gains allocated to Member Pension and Accumulation Accounts

As part of the annual compliance process ESUPERFUND will determine the income and realised capital gains made during the financial year by the SMSF. These are in turn allocated to each Member Account on a proportional basis. Income includes dividends, interest and rent from property. Realised capital gains are gains from the sale of assets like shares and property. It is important to remember that unrealised capital gains (ie from assets that have appreciated in value but have not been sold) are never subject to tax until sold.

Example:

In our earlier example assume Barney's SMSF has derived interest income of $2,000 for the financial year and sold shares held for greater than 12 months generating a realised capital gain of $20,000.  The SMSF also sold shares held for less than 12 months generating a realised capital gain of $10,000.  The income and realised capital gains are in turn allocated to each Members Account on a proportional basis as follows:  

 

Member Accounts
% Income Capital Gains
> 12 Months
Capital Gains
< 12 Months
Barney - SABP Account 63.33% $1,267 $12,667 $6,334
Barney - Accumulation Account 3.33% $67 $667 $333
Lisa - TRAP Account 33.33% $666 $6,666 $3,333
Lisa - Accumulation Account 0% $0 $0 $0
Total 100.00% $2,000 $20,000 $10,000

 

 
 
Tax Payable on Income and Realised Capital Gains allocated to a Members Accumulation Account and TRAP Account

ESUPERFUND will allocate the SMSF income and realised capital gains derived by the SMSF for a financial year to each Members Pension and Accumulation Account on a proportional basis.  The tax rate that applies to the income and realised capital gains allocated to the Members "Accumulation Account" and “TRAP Account” will be taxed as detailed below:

Income will be subject to tax at 15% 
Realised Capital Gains will be subject to tax at 15% if the asset is held less than 12 months
Realised Capital Gains will be subject to tax at 10% if the asset is held more than 12 months

Example:

In the above example tax will be paid as detailed below. 

The $67 in income allocated to Barney's "Accumulation Account" will be taxed at 15%.
The $666 in income allocated to Lisa's "TRAP Account" will be taxed at 15%.
The $667 in capital gains held for more than 12 months allocated to Barney's "Accumulation Account" will be taxed at 10%.
The $333 in capital gains held for less than 12 months allocated to Barney's "Accumulation Account" will be taxed at 15%.
The $6,666 in capital gains held for more than 12 months allocated to Lisa's "TRAP Account" will be taxed at 10%.
The $3,333 in capital gains held for less than 12 months allocated to Lisa's "TRAP Account" will be taxed at 15%.
Lisa has a nil balance in her Accumulation Account and no tax is therefore applicable.

 
 
Tax Payable on Income and Realised Capital Gains allocated to a Member SABP Account

Conversely the tax rate that applies to the income and realised capital gains allocated to Barney's "SABP Account" will be taxed is 0%. 

Example:

In the above example tax will be paid as detailed below. 

The $1,267 in income allocated to Barney's "SABP Account" will be taxed at 0%.
The $12,667 in capital gains held for more than 12 months allocated to Barney's "SABP Account" will be taxed at 0%.
The $6,334 in capital gains held for less than 12 months allocated to Barney's "SABP Account" will be taxed at 0%.

Monitoring Accumulation and Pension Accounts

If you make significant Rollovers or Contributions to your SMSF after commencing a Pension they will sit outside the Pension in the Member's "Accumulation Account" as detailed above. This will mean that earnings on this part of your Super Benefit will continue to be subject to Tax. If you are eligible for SABP and you still have a remaining cap space in the Transfer Balance Account, it may be appropriate to commence a second SABP with your "Accumulation Account" balance to continue to ensure your Super Benefit earnings continue to be completely tax free. We do caution however that additional Pensions should only be commenced when there is a significant benefit in the Members "Accumulation Account" (eg $50,000 or more). Where you are making smaller contributions (eg from your monthly employer super contributions) you should not commence a separate Pension with each of these amounts as this becomes administratively burdensome.

 
 
Tax Savings when you commence an SABP

To see the potential Tax Savings associated with commencing a Pension view our Case Study here.