Super tax breaks for SMSF pension streams
Self-managed super fund (SMSF) pensioners can get tax breaks on superannuation income streams despite across-the-board limitations for super members, according to Cavendish Super head of technical services Tim Miller.
Speaking at the Institute of Chartered Accountants' SMSF conference, Miller said although super funds could not rollover or add further contributions to a pension account, they could "manipulate (the rules) legally" to avoid tax.
SMSF pensioners could start multiple superannuation income streams he said.
"Because a pension is a separate superannuation interest, the ability to have multiple pensions based on multiple contributions is a huge advantage," Miller said.
He said the client could start one pension, begin making contributions and then start a separate pension. One pension could serve as 100 per cent tax deductible, while the other would remain 100 per cent tax-free, according to Miller.
But he said planners were getting the practicalities of SMSF exempt pension deductions wrong.
Miller said planners often informed trustees that everything after aged 60 was tax-free, although that was not the case.
"What we often get in the advice world is that when you receive a pension, your income is tax-free and your fund is tax-free - that's what's said at the advice level, but that's actually not the reality," he said.
Trustees did not need to report income, but the fund was still a taxable entity and received a tax deduction, according to Miller.
Although Miller did not advocate multiple pensions in all cases, he said it would work for a client who wanted to retain a tax-free environment to leave a larger inheritance.
Earlier, Australian Taxation Office assistant commissioner for superannuation Stuart Forsyth said non-complying pension income deductions were one of the top litigation areas.
Recommended for you
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
