The Australian Tax Office (ATO) is the regulator of self-managed super funds (SMSF), and enforcer of the law.
Commencement of a pension officially begins when?
The commencement day of an SMSF pension is the first day of the time period to which the first payment of the pension relates. This will generally be determined by the date set by Trustees as the day the pension starts as well as the governing rules of the fund. For pensions that commenced before 1 July 2007, they must continue to be paid under the previous pension payment standards unless the pension is an allocated pension. With allocated pensions, one can choose to start paying them under the minimum standards any time after 1 July 2007, without having to commute and start a new pension, as long as this is allowed by the rules of your fund. For pensions that commenced between 1 July 2007 and 19 September 2007, you can choose to pay the pension under the previous or the new pension rules, provided it is allowed by the rules of your fund. All pensions that commenced after 19 September 2007 must meet the minimum pension standards. Allocated pensions are generally now called Account-Based pensions. An account-based pension refers to a pension where an account balance is attributable to the member. That means, the amount supporting the pension must be allocated to a separate account for each member.
Minimum Pension Amounts mean?
The minimum amounts or standards mean that the super pensions paid must meet all of the following requirements:
1. The pension must be account-based, except in limited circumstances;
2. You must pay a minimum amount at least annually, stipulated by law see HERE;
3. You cannot increase the capital supporting the pension using contributions or rollover amounts once the pension has started;
4. A pension being paid to a member who dies can only be transferred to a dependant beneficiary of that member;
5. You cannot use the capital value of the pension or the income from it as security for borrowing;
6. Before you can commute a pension, you must pay a minimum amount in certain circumstances.
There are no maximum draw-down limits for pensions commencing after 19 September 2007, except for transition-to-retirement income streams.
For more examples and more details, see the ATO site HERE
Get our FREE Expert Guide – Self-Managed Super and You – it has all the info you need to know and checklists to determine if SMSF is for you and what steps are needed to set up. It also gives you ALL the Aust Tax Office publications about SMSF (NAT XXXX). Get you copy now – click “Download” top right hand side above. You’ll also get monthly SMSF news, investment teaching and upcoming seminar and workshop briefs! Download your FREE Guide now!