HAVING money in superannuation brings with it many taxation and Centrelink benefits. Sometimes members face the choice of withdrawing funds from self-managed superannuation funds or leaving them in place.
Q My wife and I currently have an SMSF, are both aged in our late 50s and retired from work. We currently draw an income from the fund. Given that I can take the remainder of my fund as a tax-free lump sum at age 65, would this mean that my wife could take hers as a tax-free lump sum at the same time even though she is a year younger?
Also, how does taking the lump sum affect later eligibility for the age pension, assuming that there is no other income and no assets other than a place of residence?
Finally, if the SMSF was retained, and again assuming no other income or assets, what approximate amount could be paid from the fund to the recipients without it affecting the eligibility for the age pension?
A If you both wanted to access your superannuation fund tax free you would only need to be 61 as your wife would be 60. The 65 age limit relates to you being eligible for the age pension, while the age limit of 60 relates to tax free amounts received from super.
Under Centrelink rules the value of your superannuation is counted as an asset. If you withdrew all of your money from the SMSF the value of the investments now held personally would be counted. In addition, the value of investments outside of superannuation is used to calculate the deemed income counted by Centrelink.
You should seek professional advice as you may be better off leaving your funds in the SMSF. This is because the value counted in the assets test will still be the same but the amount of income counted could be considerably less. When a super pension is received the amount counted by Centrelink is reduced by its purchase cost.
The purchase cost is calculated by dividing the value of your super, when starting your pension, by your life expectancy. As you will have been on a pension prior to reaching 65 you may end up with a larger deductible purchase price by commuting your old super pension and starting a new one. If you held the investments outside of super you would lose more of your pension under the income test.
Q My family are all fund members of our family SMSF. We are all directors of the corporate trustee. Each of us has a separate account within the fund. I am 67 years old and I want to withdraw a residential property held in the fund as an in-specie lump-sum payment. Can I transfer this asset out of the SMSF directly to my daughter's name as the asset value of the property would be deducted directly from my individual account and not hers?
Could the property be transferred to our family trust, of which my wife and I are directors and the only shareholders?
A Lump-sum in-specie payments can be made by an SMSF. For this to work the asset must pass from the SMSF into the name of the member who is making the lump-sum withdrawal. So, you could transfer the property from your SMSF into your name then transfer the property into your daughter's name; but there would be additional stamp duty.
Questions can be emailed to max@taxbiz.com.au
Self-Managed Superannuation Funds: A survival Guide by Max Newnham, is available in book stores.
