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Lump Sum or Pension

Discussion in 'Superannuation, SMSF & Personal Insurance' started by davewa, 19th Aug, 2013.

  1. davewa

    davewa Active Member

    Joined:
    22nd May, 2011
    Posts:
    40
    Location:
    Sydney, NSW
    Hi all,

    For an SMSF member who is over 60, fully retired and in Pension Mode, is there any difference between a Lump Sum payment and a Pension payment?

    Sorry if this question is dumb, but I've been wondering about this one for some time.

    Cheers,
    Davewa
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
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    653
    Location:
    Sydney
    Yes.

    Tax for one. Earnings in the fund could be tax free whereas if you take a lump sum and then invest and earn income this could be subject to tax depending on your other income and amounts etc.

    Asset protection is another as is estate planning pre and post death.
     
  3. davewa

    davewa Active Member

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    22nd May, 2011
    Posts:
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    Location:
    Sydney, NSW
    Thanks TerryW,

    Sorry I didn't ask my question clearly. What I meant to say was let's say I want to withdraw 30% of my balance. Is there any difference in terms of paperwork for doing it as a lump sum or as a one-off pension payment?

    Regards,
    Davewa
     
  4. greg999

    greg999 Member

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    29th Mar, 2012
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    Location:
    Sydney, NSW
    Good question - don't know the answer.
    Perhaps a lump sum would count towards the asset test for Social Security purposes, if that's relevant to your case (?)

    Greg999
     
  5. Andrew Newman

    Andrew Newman Well-Known Member

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    5th Nov, 2008
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    Location:
    Melbourne
    Hi davewa

    Your SMSF accountant should let you know what paperwork you need.

    Just curious, how are the funds invested in your SMSF?

    Kind Regards
     
  6. davewa

    davewa Active Member

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    22nd May, 2011
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    Location:
    Sydney, NSW
    Hi Andrew,
    Well surely it doesn't matter what I've invested in, so long as I have available cash to pay the pension / lump sum.

    Having recently done a couple of interstate moves, I am in the process of looking for an accountant that I can address such questions too. The recent accountants that have done our annual returns weren't all that knowledgeable about SMSF unfortunately.

    Regards,
    Dave
     
  7. Drue

    Drue SMSF Accountant

    Joined:
    11th Oct, 2013
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    Location:
    Sydney,NSW
    If you are already in pension mode, no additional paperwork is required for the pension payment. Otherwise, pension commencement documents need to prepared and signed. With respect to lump sum payments, it is always a good practice to have a member request and trustee minutes in place.

    For accounting and tax purposes, they are reported differently. But you can leave it with your accountant.

    Hope it helps.
     
  8. Andrew Newman

    Andrew Newman Well-Known Member

    Joined:
    5th Nov, 2008
    Posts:
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    Location:
    Melbourne
    Hi davewa

    How the funds in your SMSF are invested has nothing to do with the pension but I asked this question out of curiosity.

    Kind Regards
     
  9. davewa

    davewa Active Member

    Joined:
    22nd May, 2011
    Posts:
    40
    Location:
    Sydney, NSW
    Hi Drue,

    Yes, that's helpful information.
    Thanks,
    Dave