Question 1: A well known financial media person advised on the radio, (about 12 months ago) that when an SMSF is converted to ‘pension mode’ and starts paying an account-based pension, all pension payments MUST be made by cheque only. No electronic transfer of pension payments is allowed.
Is this correct? If so, please advise where this regulation is written, for example, in the SIS Act 1994 or some other SMSF reference. I am reviewing the SIS Act 1994 and I can’t find (yet) any paragraph as to how an account-based pension must be paid. The Trust deed for my SMSF does not state the exact method of account-based pension payments either.
Answer (by Tony Negline): There’s nothing in the SIS Regulations saying that EFT can’t be used. What can’t be used is non-money i.e. in-specie payments. The SIS Regs (refer to Part 6) says pension income payments must be money – APRA and the ATO interpret this word narrowly.
Question 2: In a February interview with Joe Hockey, you talked about his party’s philosophy on taxing SMSFs. Is there any way of lobbying to make sure the original terms of these funds being ‘tax exempt’ is adhered to.
Answer (by Peter Switzer): The stated Liberal Party Policy is not to make any changes that are adverse to the superannuation system. The words that appear are: “only the Coalition can be trusted not to make any unexpected detrimental changes to superannuation in the next term of Parliament.”
I think that a tax on pension income qualifies in this category. Also, for reasons that Tony Negline made clear the other week in the Switzer Super Report, administering any such tax will be very problematic. I don’t think this proposed change will ever see the light of day.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
Also in the Switzer Super Report:
- Charlie Aitken: NAB and Suncorp – dog starts wagging the tail
- Paul Rickard: ASIC’s “crackdown” on hybrids – more noise?
- Ron Bewley: Still hopeful for Cochlear
- Barrie Dunstan: Stick to the strategy
- Penny Pryor: Buy, Sell, Hold – what the brokers say
- Tony Negline: When are my financial advice fees tax deductible?
