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SMSF Pensions

Why you should start a pension

The main benefit to starting a pension is that all the income (concessional contribution excluded) that belongs to the pension account are exempt from tax.

Preservation age

You only can commence the pension account in your SMSF when you reach the preservation age. To see current preservation age, click here

Account-based Pension

An account based pension is a pension payable from your member’s account after you reach your preservation age. It can be regular payment and may provide you with both tax and social security effective benefits.

Condition of Release

You need to satisfy one of the conditions of release to be able to withdraw the benefits from your SMSF. After you reach your preservation age and you under 65 of age, the condition of release is that you retire and you have no intention to be re-employed on a full-time or part-time basis.

After you turn 65, you may cash your benefits at any time. There are no cashing restrictions once you are 65 years old or over. Attaining the age of 65 is a condition of release.

There are other conditions of release other then retirement, to see more, click here

Transition to Retirement Pension

What happens if you are not retired after reaching your preservation age? You can start a transition to retirement pension that allows you to cash maximum 10% of your member balance in your SMSF.

Minimum and Maximum Pension Payment

Once you have commenced the pension, you have to make sure you have withdrawn the minimum pension from your SMSF. The clients of iCare Super will be reminded twice every financial year to take out the minimum pension from their SMSFs.

The consequence of failing to withdraw the minimum pension is that the income generated from that pension account will not be exempt. It is also a audit issue that needs to be rectified.

If the pension commenced in your super fund is not a transitional to retirement pension, there is no limitation and you can access the full balance of the pension account.

Actuarial Certificate

If you have an accumulation and pension accounts in your SMSF at the same time, most of SMSF administrators like applying actuarial certificate to know what is the tax free percentage applies to your super fund. It makes their job easier but your SMSF has to pay about $200-300.

Pension Assets Segregation

At iCare Super, we can use the segregated assets method to allocate specific assets to your pension accounts. The advantages are:

- You do not need to pay the fees for acquiring the actuarial certificate.

- Normally the assets generating high income will be allocated to pension accounts, which mean the income will be exempt.

Why do many SMSF administrators and accountants try to stay away from providing these services to you? Because they think it is too hard! At iCare Super, we do this for you for free!

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