Retirement
Reap the benefits of your hard work.
Reap the benefits of your hard work.
Just like any other superfund, your SMSF can provide you with pension (or lump sum) benefits in retirement.
To start pension payments, you need to either reach your preservation age and retire; or turn 65.
If you start a super pension income stream, you need to transfer funds from your accumulation account to your retirement account to fund your pension. The earnings on these funds are tax-free in the fund. Moreover, if you are over 65, the pension is tax free in your own name as well.
Note that you can only transfer up to $1.6 million into your retirement account.
Transition-to-retirement (TTR) pensions can be commenced once you have reached your preservation age while you’re still working. However, the earnings on funds that support TTR pensions are still taxed at 15%, unlike the funds that support your super pension are if you have retired.
There are several steps involved in starting a pension and we can help you out with all of them!
All assets must be revalued before pension starts. This is fairly easy when it comes to listed securities or managed funds, you should seek real estate valuation if your fund owns a property to ensure that the valuation is reasonable.
Check the deed, prepare relevant minutes and provide PDS to the member that is starting a pension.
Majority of the funds use non-segregated assets (where specific assets are not allocated to relevant members,but rather percentages are calculated). If this is the case, not only we calculate the relevant percentages but also have them confirmed by an actuary as required by the legislation.
Note that a fund that only has members in retirement phase, or only has members in accumulation phase, is treated as a segregated fund (and does not need an actuarial certificate).
The minimum pension varies depending on your age and is updated by government regularly. It is important to make the minimum payment each year, so the fund does not lose the tax benefits.
If you are considering retirement, please contact our office.
The pension is tax free after you turn 60.
If you are between your preservation age and 60, the pension income is added to your taxable income where it is taxed at your marginal rates, with credit for tax paid by the fund (15%).
You MUST withdraw your minimum pension each year, with at least one payment.
The exception is if you start pension after 1 June, where you do not need to make a payment that year.
The minimum annual payment amount is worked out by multiplying the member’s pension account balance by a percentage factor. The amount is rounded to the nearest 10 whole dollars. If the amount ends in an exact 5 dollars, it is rounded up to the next 10 whole dollars.
The pension factor depends on your age.
| Age | 2007–08 | 2008–09, 2009–10, 2010–11 | 2011–12, 2012–13 | 2013–14 onwards | Reduced rates by 50% for the 2019–20 and 2020–21 income years |
|---|---|---|---|---|---|
| Under 65 | 4.0% | 2.0% | 3.0% | 4.0% | 2.0% |
| 65–74 | 5.0% | 2.5% | 3.75% | 5.0% | 2.5% |
| 75–79 | 6.0% | 3.0% | 4.5% | 6.0% | 3.0% |
| 80–84 | 7.0% | 3.5% | 5.25% | 7.0% | 3.5% |
| 85–89 | 9.0% | 4.5% | 6.75% | 9.0% | 4.5% |
| 90–94 | 11.0% | 5.5% | 8.25% | 11.0% | 5.5% |
| 95 or more | 14.0% | 7.0% | 10.5% | 14.0% | 7.0% |
If a member dies, the SMSF pension can only be transferred or paid to a person who is a dependant of the member, which includes:
