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A SMSF selling units back to the relate Unit Trust that they are current investment
Can they offset the sell price $ with pension drawing in SMSF ?
Many thanks
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Thanks a lot for your help
A pension payment needs to satisfy, amongst other things, the requirements of the Regulations to the SIS Act.
As a broad proposition, a pension payment from a superannuation fund needs to be “cashed out” of the fund. This requirement has obvious connotations that only payments from a superannuation fund’s bank account can be viewed as legitimate payments to a fund member under a complying pension.
It certainly means that pension payments from a superannuation fund cannot be made in specie (that is, by transferring an asset in satisfaction of the liaiblity to make a pension payment).
However, if a fund member has a legal obligation to a superannuation fund, and the superannuation fund has a legal obligation to make a payment arising from a pension the fund member is receiving, it might be possible to enter into a set-off arrangment. Any such set-off arrangment should be properly doucmented.
In ATO ID 2015/13, the ATO states:
So, there is an argument that where a member of an SMSF has acquired an asset from the fund (as is indeed possible, and crucially, the transaction is for market value), the minimum pension payment owed to that same member, could be set-off against the amount owed by the member of the fund who is acquiring assets from the fund at their market value.
It could be a cause of concern if the fund had inadequate liquidity to make a minimum pension payment, and the only reason why it is being contemplated to sell fund assets to a member of the fund, is to put the fund in a position where such a set-off arrangement could be implemented.
It would be interesting to hear the perspective of other SMSF auditors on this matter.