SMF has 1 member aged 61 retired who also has a defined benefit pension. He has itotal SMSF interests to excess of $ 3m so is exploring to cash out his SMSF in near future. SMSF has fully liquidated its assets so has derived substantial capital gains. (discount gains -no other concession available) Last year Member has taken a partial pension in the SMSF having due regard to the TBAR position of $ 1,620,000 (at 30 June 23) He has taken the minimum pension for 2024 leaving a pension balance of estimated to be more than $ 360,000 presently.

The member proposes to give notice to the Trustees of the SMSF (after obtaining winding up overview advice from a financial planner privy to all of his super interests) to fully commute the pension on around 25 June 2024; then after retaining for calculated costs (accountancy , actuary and audit plus tax) liquidate the SMSF.

Please confirm that as the assets are not segregated (disregarded small fund assets) the income tax exemption is applied proportionately over the entire 2024 year of income. So the later the member gives notice of commutation the larger the income tax exemption.

Also I understand from the ATO Ruling 2013/5 the member could take a partial lump sum earlier and the exemption period would only expire when the entitlement to pension benefits ends; that is when he gives notice so as to exhaust the pension balance. To improve accuracy in estimating the taxation liability an actuary may be consulted earlier than the end of financial year.