Simple advice for keeping your superannuation tax-free 2



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If you’re moving into the retirement zone — and for those of you already there — the date at which you should draw down your pension from a self-managed super fund (SMSF) is drawing near.

June 30 is the date the Australian Taxation Office (ATO) asks all those on a standard account-based pension income stream to withdraw their minimum annual payment.

If you’re aged 60 years or older and you don’t withdraw that minimum amount you risk the ATO putting a stop to your SMSF’s tax-free income stream.

No one needs that.

According to SMSF Association CEO Andrea Slattery, the budget’s proposed pension changes mean if you are a SMSF member already in pension mode you need to start thinking about how your investments are structured.

“To plan for the new rules they need to think about segregating high-earning assets to pension accounts to ensure tax effectiveness after July 1, 2017, what alternative tax-effective investments are available outside super, and can lower their tax bill by using [low income tax offset] and [senior Australian and pensioner tax offset] rather than 15 per cent tax in accumulation,” Slattery told The Australian.

It is the ATO that sets the minimum amount that you must withdraw from your account-based pension, based on an annual percentage rate that is applied against the balance of your pension account.

If you are under the age of 65, you must withdraw at least 4 per cent of your pension account balance each year.

While there is a standardised minimum, there is no limit to the amount you can withdraw.

Are you eligible for a pension from your SMSF? What other questions do you have about superannuation and the pension?

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  1. Okay is this only for those that have a SMSF? This only confuses me more. I don’t have a SMSF and I am between 60 and 65. We are using my husband’s super first ( also not a SMSF) so do I still have to withdraw the minimum a out?

    1 REPLY
    • Linda, there are two sorts of superannuation funds. An accumulation fund has no requirement to withdraw any money. In fact you cannot withdraw any money from super until you are retired, but you can keep your money in accumulation even after you are retired and you take lump sums from the fund at any time after you have retired until there is none left. The only catch is that the income (and contributions) in the accumulation fund is taxed at 15%.

      Once you are retired you can move some or all of your money into a superannuation pension fund. If you take the money out as a regular income stream (pension), this fund has no tax on income or capital gains, and it is also tax-free to you, if you are over 60. The only catch is that you must take the minimum pension every year – before 30 June. If you do not, the ATO will tax the fund as an accumulation fund. The other catch is that the minimum pension withdrawal must be in cash and it increases with age. The minimum is 4% between the ages of 55 and 65 rising to 14% after the age of 95. Pretty soon you end up being forced to take more than you need and start running down the balance of the pension fund.

      Super is designed to pay for your retirement (and reduce your claim on the age pension), it was not designed to be passed on to your beneficiaries on your death.

      These two types of funds can be held inside a SMSF or they can be held in a retail or industry super fund – the tax treatment is exactly the same.

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