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SMSF Pension - Rollover to New Fund

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Jenni, 23rd Feb, 2010.

  1. Jenni

    Jenni Active Member

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    27th May, 2009
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    Location:
    Brisbane, Qld
    Hi

    I was wondering if anyone had experience rolling over an existing pension (in specie - listed shares and cash) in a SMSF to another super fund (eg a SMSF or wrap account - not as a result of divorce, etc).

    The funds are in pension phase in the current SMSF and will be also be in pension phase in the new SMSF. Member is over 60. Is there any CGT issue? In other words, is there a deemed reversion to accumulation phase before the rollover can occur?

    Thanks for any help anyone may have.

    Jenni
     
  2. Superman

    Superman Well-Known Member

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    Location:
    Gold Coast, QLD
    What type of pension Jenni?

    Allocated
    Account Based
    Term Allocated
    Complying
     
  3. Jenni

    Jenni Active Member

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    Sorry, should have said - account-based pension.
     
  4. Superman

    Superman Well-Known Member

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    OK

    It is possible to do an in-specie transfer for the shares.

    However, based on experience, the easiest way would be to sell down the shares and get that members benefits to 100% cash if possible. It is a lot easier moving the cash than off market transfers etc.

    If all the assets are used to support the account based pension, the income and gains on those shares will be 100% tax exempt - so no CGT on the sell down of the shares (is it a single member fund???).

    Obviously having everything in cash may not be the best investment strategy - so any sell down will need to be timed to ensure that all the final dividends (and refundable franking credits) are received.

    You now have two options to transfer the members benefits into the new SMSF:

    1. Transfer the majority of the cash before 30 June and the balance (as a second rollover) in say August / September after the 2010 return is lodged and tax refund received (not to mention any dividends and distributions that were declared before 30 June).

    2. Transfer the entire amount pre 30 June - but use a debtor / creditor arrangement for the amounts that will need to be transferred to the new SMSF.

    The easiest way is probably option 1 - but if the original SMSF is to be wound up, the member may have to wait another year to wind up the fund.

    Once the monies are in the new SMSF commence a new account based pension (or two) for the member to keep everything 100% tax free.

    Jenni - if you are an accountant and your not an authorised rep of an AFSL - you technically cannot give a lot of the advice or do the work required to make the transfer happen. You may need to get an appropriately qualified financial planner to do some of the leg work.

    If the client is willing to handle some of the leg work themselves - they can - but you need to realise if anything goes wrong they will blame you.

    I haven't asked you why the member wants to transfer their benefits across to a new SMSF - I am sure there are good reasons.

    I hope I have answered your question.

    I also hope I have triggered a lot more questions.

    Good luck

    SM
     
  5. Superman

    Superman Well-Known Member

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    Alternatively, depending on the member balance, it may be worthwhile looking at a re-contribution strategy to maximie the tax free component and enable tax free benefits for adult children etc.

    Bit hard to say based on the information provided - just throwing it out there!

    SM
     
  6. Jenni

    Jenni Active Member

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    Location:
    Brisbane, Qld
    Hi Superman

    Thanks for the info - it confirms what I thought should be the case, just wasn't 100% sure. We have already put in place the recontribution strategy by taking out a lump sum in cash and will recontribute to the new fund.

    FYI we are splitting a two member segregated account fund as the admin was too hard (eg software wont do the tax calculations properly, so had to be done manually) and it will be cheaper to run the two fund's separately (as I can do everything except the audit using Simple Fund).

    Again, thanks for your help.

    Jenni
     
  7. Superman

    Superman Well-Known Member

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    Location:
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    OK Jenni - it all makes sense now!

    If you need a good audit company we have two SPAA Specialist Auditors in the office and we are pretty competitive with fees.

    Our main SMSF auditor is awesome as he is good at working with advisers and trustees to fix problems rather just lodging an Audit Contravention Report and washing his hands of the whole issue.

    Please contact me if you want further information :)

    Thanks
    SM