Join our investing community

Accumulation phase to Pension Phase

Discussion in 'Introductions' started by KAYAK1, 17th Aug, 2010.

  1. KAYAK1

    KAYAK1 New Member

    17th Aug, 2010
    Brisbane, Qld
    I have an account based pension and as I also contributed to my SMSF last year I also have an accumulation Fund. This year I am planning to again contribute to my SMSF. If I contribute say, $50,000 concessional and a further $150,000 non-concessional can I then immediately transfer the accumulation account to a second account based pension. That is, do I have to wait for the next financial year?
  2. Superman

    Superman Well-Known Member

    6th Nov, 2007
    Gold Coast, QLD
    Hi Kayak1 (and welcome),

    No - you can commence a new account based pension(s) immediately after making the contributions. You don't have to wait until the new financial year.

    What you need to be careful of is you tax / tax-free components.

    I would assume that your existing account based pension is a mixture of tax/tax-free (%'s) - and those %'s are locked in unless you stop and re-start a new pension.

    In practice, if you are over 60 it really does matter to you - as regardless of the components of your account based pension is tax free to you - however when you die (or your wife / partner dies down the track if it is a reversionary pension) - then the components will directly impact any adult children who may receive a payout.

    They pay tax on the taxable component % only - so it is in their best interests to maximise the tax free % = little or no tax if they receive a death benefit down the track.

    If you are over age 55 but under age 60 then you still pay tax on the taxable component (with a 15% rebate which is good) - so likewise you want to maximise the tax free component. You can also use your low-rate cap to draw amounts as tax free lump sums.

    If you are putting in a $150k non-concessional contribution, you may want to keep this in a separate account based pension and only draw the bear minimum per annum and take the rest out of the pensions that have the higher taxable components.

    Depending on your age, amount of super and the contribution limits you can also take a lump sum and contribute that back into the SMSF as further non-concessional contributions to make that amount tax-free also.

    If you also have realised or unrealised losses from the bumpy financial markets over the last couple of years you can also stop and re-start your existing account based pension - any loss will be applied against the taxable component as the tax-free component (made up of previous non-concessional contributions etc) is frozen so it will not decrease.

    If the contributions were only in your bank for less than 24 hours and then used to commence new account based pension(s) they your SMSF should still be 100% tax exempt and you shouldn't need an actuarial certificate.

    A lot of the above is all just documentation that needs to be done by your adviser - but I reckon you will need some customised advice in there somewhere - if you want a referral to another SMSF specialist please let me know.

    Sorry - I have probably bombarded you with way too much information - but I am pretty sure I have answered your question.

    If you want clarification please ask.

    Good luck