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I am in the fortunate position of having a reasonable sum of money in my SMSF. At this stage my Fund balance is slightly over the 1.6m Pension Cap by $10k.
Currently I hold approx. 1.5m in stocks and 110k in cash. My SMSF is in pension mode and I pay myself a monthly pension from the fund.
Most of my investments are listed on the ASX and my SMSF has been hovering around the 1.6m limit for some time now. If the markets tread a steady path I estimate I will be over the limit by approx. 20K.
My thoughts were if I was to be over the 1.6m limit prior to the cut of period I would take the exccess from the cash account as it would save me the bother from selling a small proportion of stocks to settle the matter.
I believe I have 2 options with this small excess amount;
A) Roll back the excess into an accumulation account within the SMSF where 15% of tax is payable on the earnings.
B) Withdraw the excess to hold in another entity or personally.
I believe rolling back into an accumulation account could be a bit fiddly so my thoughts were to go with option B and place this excess amount (say 20k) into my personal bank account and possibly put it towards some house maintenance or my kids Uni fees.
I’m assuming that under option B the amount I am withdrawing from the SMSF would be classified as a lump sum payment.
My Question is: Do I need to undertake this trimming to the 1.6m limit each year from here on in, or is this the one and only time that this is required to be undertaken?
A: Thanks for the question.
Your articulation of the position and the options available to you is absolutely correct.
No, you will not need to undertake the trimming each year. This is the only time you will need to do it (obviously, because you have reached your cap, you will not be allowed to commence any new pensions).
There is one further point I should make. There is a transitional relief for persons whose balance is between $1.6m and $1.7m . If at 1 July 2017, the total value of your pre 1 July 2017 retirement phase income streams is between $1.6 million and $1.7 million and the excess comes from account based income streams, you will have six months to remove the excess capital without penalty.
Regards
