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Moving to retirement

You need guidance on commencing an income steam

Moving to retirement
Superannuation income stream
Taxation
Starting an income stream
Income stream - Q & A

Income stream - Q & A

Do I need to close down the SMSF and start a new one for pension/ income stream?

No - your SMSF's trust should permit a member to seamlessly transfer capital from accumulation phase to retirement phase, including to transition to retirement income stream. There is no requirement to close and restart a new SMSF for pension.

Do I have to dispose assets of the SMSF when commencing a pension/ income stream?

No. There is no requirement to dispose any assets of the SMSF. The pension/ income stream is commenced based on the amount of capital that is determined to be held in retirement phase.

Is there any tax charged when commencing a pension/ income stream?

There is no tax event on commencing a pension/ income stream. Furthermore, gains accumulated prior to commencing a pension/ income stream are also not taxed when disposed in retirement phase. For example, capital gains from shares bought when you were in accumulation phase, and sold after you commence retirement phase income stream is tax free. If the whole fund is not in retirement phase, the part that is in accumulation phase is taxable.

How is the proportion of accumulation phase and retirment phase determined?

The proportion that is in retirment phase is exempt from income tax, including capital gains tax. An actuary will determine the percentage, and certify the percentage.

Can a transition to retirement income stream be cashed as a lump sum?

No. A transition to retirement income stream cannot be cashed as a lump sum. Once a condition of release is satisfied (e.g. retirement or attaining the age of 65), the restrction are removed, and the income stream may be commuted and paid as a lump sum.

Once I commence an income stream/ pension, can I still contribute to the SMSF?

Yes. You can commence an income stream/ pension (including a transition to retirement income stream) and still contribute to the SMSF if you meet the normal eligibility requirements. In this situation, you will have 2 'account' in the SMSF. One being the income stream/ pension account which will pay you the income stream benefits and the other is an accumulation account that you are contributing to.

Can I contribute to the income stream/ pension account?

No. You cannot contribute to an income stream/ pension account. All contributions are made to the accumulation account.

Can I add to the income stream/ pension account?

No. You cannot add capital to an income stream/ pension account. You can commence another income stream/ pension account. You can have multiple income stream/ pension accounts in your SMSF.

What happens if the SMSF does not pay the minimum pension amount or there is a shortfall?

The income stream/ pension account fails to meet the minimum standards, and will not be able to claim an exemption from income tax.

When does a SMSF require an actuarial certificate?

An actuarial certificate is required when the SMSF have member benefits in retirement phase and is not segregated. The actuary will certify the proportion of the assets in retirment phase for claiming an exemptoin from income tax. There is a small cost for the actuary to provide the certificate. See fees schedule.

A SMSF cannot claim exemption from income tax without an actuarial certificate, unless the fund's assets are segregated.

Where the assets are segregated (including fund that is wholly in retirement phase), an actuarial certificate is not required to claim an exemption from income tax.

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