SuperGuide

Superannuation and retirement planning information

December 2024 SMSF newsletter

Your SMSF calendar for 2025
Forewarned is forearmed, as they say, so why not download our 2025 SMSF calendar to ensure you don’t miss any crucial dates, deadlines or opportunities in the year ahead. Read more.
Your SMSF calendar for 2025
Forewarned is forearmed, as they say, so why not download our 2025 SMSF calendar to ensure you don’t miss any crucial dates, deadlines or opportunities in the year ahead. Read more.
What are the setup and running costs for an SMSF?
Cost may not be the main factor when deciding whether to start your own super fund, but you need to know what the costs might be in your time as… Read more.
What are the setup and running costs for an SMSF?
Cost may not be the main factor when deciding whether to start your own super fund, but you need to know what the costs might be in your time as… Read more.
What is the sole purpose test, and how does it work?
As the name suggests, the savings you accumulate in super are meant to be for one purpose only. Straying from that purpose can be costly. Read more.
What is the sole purpose test, and how does it work?
As the name suggests, the savings you accumulate in super are meant to be for one purpose only. Straying from that purpose can be costly. Read more.
Real DIY super: How to keep SMSF costs super low
With the cost of living front of mind, you could potentially save a lot of money by doing more of your SMSF tasks yourself, but you need to know what… Read more.
Real DIY super: How to keep SMSF costs super low
With the cost of living front of mind, you could potentially save a lot of money by doing more of your SMSF tasks yourself, but you need to know what… Read more.
Platforms and wraps: Benefits and downsides
Technology is at the heart of recent innovation by platform providers as they compete against each other, industry funds and SMSFs for your super and non-super investments. Read more.
Platforms and wraps: Benefits and downsides
Technology is at the heart of recent innovation by platform providers as they compete against each other, industry funds and SMSFs for your super and non-super investments. Read more.

SuperGuide members Q&A: December 2024

Thursday 12 December 2024 at 11:00 am AEDT

In this webinar super expert Garth McNally answers recent questions from SuperGuide members.

IN CASE YOU MISSED IT: Watch our previous webinar, Advice options for planning your retirement.

Q: Thank you for the informative article in which you address pension account amalgamation.

My spouse and I have an SMSF, which started in 2007 and which has multiple pension funds in both names. I do the accounting (that was my area prior to retirement) and have been meaning to combine the pensions to one each, every year but the technicalities are seemingly intricate and fraught with danger as mentioned by a former colleague who wasn’t able to provide the actual technical details.

Apparently grandfathering of the older accounts may mean that one shouldn’t fold these into a new pension account (after converting them all back to accumulation phase of course). Is this to preserve the taxable/non – taxable ratio?

Additionally, how does one meet the TBAR reporting requirements for this event when one would do the actions at a date in the past yet one has to meet the meet the TBAR date requirement date for a quarter which is in the past? When rolling forward to a new year to begin processing one has to have completed the prior year, this is usually well past the quarter in which the reportable event happens.

A: Please note that our response below is general in nature and doesn’t take into account your personal situation.

Firstly, let us address your question about pre-2015 pensions. These pensions are assessed differently in Centrelink means tests for the Commonwealth Seniors Health Card and Age Pension.

If you held a Commonwealth Seniors Health Card immediately prior to 1 January 2015 and have held it continuously since then, any pre-2015 account-based pension is not counted in the income test that determines your eligibility for the card. If you cease a pre-2015 pension, the balance will instead attract deemed interest for the purposes of the income test. This could mean the loss of the card, depending on your overall circumstances.

Similarly, if you were receiving an Age Pension at that time and continuously since that date, income from a pre-2015 account-based pension is calculated based on your actual income payments less a deductible amount for the purposes of Age Pension income testing. If you cease a pre-2015 account-based pension and retain the funds in accumulation or commence a new pension, the balance of the account will instead attract deemed interest that is counted in the income test. This could either improve, reduce, or have no effect on your Age Pension depending on your overall circumstances.

As you mention, when you cease your existing pensions and return these to the accumulation phase, it will result in all of the existing tax components being blended together in your accumulation account, something that can never be unwound. Any prior estate planning or tax planning strategies that you have implemented by keeping your taxable and tax-free components separate would be undone and could never be reinstated moving forward (on these existing benefits). 

Depending on your own personal position and the circumstances of your “death benefit beneficiaries”, merging these tax components and losing the ability to deal with them separately, can have a significantly negative tax effect as I am sure you would be aware due to your accounting background. Hence the need to decide, based on your own position, what is best for you: (1) ease of fund administration by running fewer pension accounts; or (2) the tax benefits that may be relevant from keeping the tax components separate.

In relation to the process of commuting pensions, combining balances, and commencing new pensions, this is not a transaction that would be done at a date in the past. A written request is required to commute pensions back to accumulation phase and the commutation takes place after that request. The TBAR report is then made at the end of the quarter that the commutation (or multiple commutations) took place. Any new pension commenced should also be included in the TBAR report. So essentially, the ceasing (commutation) of the existing pensions AND the recommencement of the new pensions would/could be carried out at the same time and then reported within the same TBAR report. 

For the purposes of TBAR reporting, the market value of the pension must be known at the time of the commutation and the time of commencement of a new pension. Note that the ATO requirement around valuations when a pension starts is as follows: “The valuation should be based on objective and supportable data. In some circumstances a reasonable estimate may need to be made”. If you track your existing superannuation pension balances then you would know what the balances are. 

The ATO provides guidance about valuing assets for the purpose of inclusion in the TBAR report and other purposes.

December 31

It is now just six months until the proposed new Division 296 tax rules for member balances above $3 million is due to take effect. While it is not yet legislated, you may need to start thinking about and implementing any agreed changes within the SMSF in the first half of 2025. SuperGuide will keep you posted about if and when the law is passed, or if there are any amendments to the proposed legislation.

Important: All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

Superguide Pty Ltd ATF Superguide Unit Trust as a Corporate Authorised Representative (CAR) is a Corporate Authorised Representative of Independent Financial Advisers Australia, AFSL 464629.