SMSF in pension MUST meet minimum repayments
Under the current super rules once a super fund member commences an account-based pension there are minimum amounts which must be paid out to the member each year. The minimum amount is calculated as a percentage of the individual members account balance as at 1 July based on their ages as follows:
|
Age |
Percentage of account balance |
|
Under 65 |
4% |
|
65-74 |
5% |
|
75-79 |
6% |
|
80-84 |
7% |
|
85-89 |
9% |
|
90-94 |
11% |
|
95 or more |
14% |
Example: John who is 67 is being paid a pension from his Self Managed Super Fund has a member balance of $1,650,000 as a 1 July 2009. For the 2009/2010 financial year the minimum pension that John would be required to withdraw from the fund is $82,500 (5% of $1,650,000).
The super fund trustee MUST ensure that the minimum pension payment is physically paid during the financial year. If sufficient pension payments are not made to meet the minimum obligations, the payment will not be regarded as a superannuation income stream benefit for the purpose of ITAA 1997 – resulting in the fund not being entitled to the exemption for income relating to their current pension. This would result in the fund being taxed on income that would have previously been exempt if relating to the pension payments.
There is relief for 2008/09 and 2009/10 years!!
Due to the impact of the downturn in global financial markets on superannuation accounts the minimum pension percentages have been revised. For the financial years ended 30 June 2009 and 2010 the regulations reduced the minimum annual pension payment by 50%. This means that the percentage of account balance for a member receiving a pension who is under 65 for the 2009 year is reduced to 2%.