You have the ability to commence a Transition to Retirement income stream within a SMSF.

A SMSF Transition to Retirement income stream is an income stream (aka pension) commenced by members who have reached their Preservation Age and still working.

How to commence a SMSF Transition to Retirement Pension

A member of a SMSF can commence a Transition to Retirement pension using some or all of their ‘Accumulation’ balance. It can be commenced on any day of the year.

SMSF Minutes and Pension documentation is required to be completed and signed to signify the commencement of pension.

Details of a SMSF Transition to Retirement

A Transition to Retirement pension is similar to an ordinary Account Based Pension. The difference is that the recipient of the pension s limited to a maximum pension income equal to 10% of the account balance, as calculated on 1 July or at the commencement of the pension.

You should read the following articles for more information in relation to SMSF Transition to Retirement income streams

Transition to Retirement Strategy

Transition to Retirement Example

Transition to Retirement Rules

Superannuation Rules for Over 55’s

SMSF Transition to Retirement – Trust Deed

This is something that can often be missed by SMSF trustees when commencing a Transition to Retirement pension.

The Transition to Retirement legislation came into effect in 2007. Therefore, if the Trust Deed of the SMSF was last updated prior to 2007, it is likely that the Trust Deed will require updating prior to commencing a SMSF Transition to Retirement pension.

SMSF Transition to Retirement – Investment Strategy

This is also something that needs to be addressed. You should make sure that the SMSF Investment Strategy acknowledges that there is one or member in pension phase to show that the SMSF has the ability to meet pension payments, as well as other costs such as life insurances, accounting fees, etc.

 

For example, some SMSF’s have a property as the predominate asset of the Fund. This can cause liquidity issues and affect the ability to meet SMSF Transition to Retirement pension payments if the property was not leased or unoccupied for a period of time.

If you would like anything clarified or have any further questions about SMSF Transition to Retirement or any other topics, please do not hesitate to leave a comment.

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Chris Strano

Chris Strano is a specialist independent superannuation author for SuperGuy.com.au - one of Australia's leading superannuation information resources.

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