ACCOUNT BASED PENSIONS - ENSURE THE MINIMUM PAYMENT REQUIREMENT IS MET

Once an account-based pension commences, there is an ongoing requirement for the trustee of a complying super fund to ensure the pension standards in the super laws are satisfied. This includes meeting the minimum pension payment requirements.

Minimum pension payment requirements are calculated by applying age based percentages to member account balances. They need to be re-calculated every year.

If a fund fails to meet the minimum pension payment requirements in an income year the pension income stream will be taken to have ceased at the start of that income year for income tax purposes and the fund will not be entitled to treat income or capital gains as exempt current pension income (ECPI )for the year. This usually results in the fund paying income tax of 15% on earnings of the fund.

With 30 June 2017 just around the corner, trustees of SMSFs paying pension income streams should review now to ensure minimum pension payments will be met. 

Further information can be found at:

https://www.ato.gov.au/super/self-managed-super-funds/in-detail/smsf-resources/smsf-technical/smsfs--minimum-pension-payment-requirements---frequently-asked-questions/

 Please contact Andrew Marshall or Janine Orpwood at Langley McKimmie Chartered Accountants on (03) 5427 8100 to discuss further.
We provide accounting and wealth management services to clients in Woodend, Gisborne and Macedon Ranges areas within Victoria Australia.