Now that we are well and truly into the new financial year and working under the new superannuation regime, there are some important changes regarding how you draw amounts above your minimum pension withdrawals and how these are to be accounted for in the Fund. This affects all superannuation benefits in pension mode, not just those in self-managed superannuation funds.
There are two scenarios that this will affect:
Superannuation Balance more than $1.6M
As a general rule, if your Total Superanuation Balance (TSB) is more than $1.6M and you have an accumulation balance as part of your superannuation balance, any amounts above your minimum pension requirements can be withdrawn from your accumulation account rather than your pension account/s. For the withdrawal to be treated in the correct way, it is vitally important that the documentation designating the withdrawal as being a lump sum withdrawal from your accumulation account is in place before the withdrawal is taken. If the correct paper work is not in place before the withdrawal, the default position is that it will be treated as a pension payment. This will deplete your pension account which cannot be increased later.
Superannuation Balance less than $1.6M
If your total superannuation balance is close to $1.6M or your pension balance and that of your spouse together, will be close to or more than $1.6M, it may still be beneficial to treat withdrawals in excess of the minimum requirements as a lump sum. This is because lump sum withdrawals made from a partial commutation of your pension balance will be recorded as a reduction in your Transfer Balance Account (TBA), whereas a pension withdrawal will not. This could become very important at a later stage if your TSB is to come close to or exceed $1.6M by either additional contributions or the transfer of your spouse’s TSB on their death.
Whilst the above comments are very general in nature and do not take into account your specific circumstances, the message is that if you do wish to withdraw amounts more than the minimum pension requirements, you should contact us or your financial planner to discuss how they should be treated. Where the decision is straight forward, you can instruct us to prepare the necessary documentation. However, if you need to seek advice, a Statement of Advice will be required.
Please contact Valda or Nerissa if you require further information or clarification.