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May 12, 2023

Single asset in pension fund

in SMSF Technical Forum

Hi,

I have a client aged 70 and has two funds; SMSF ( pension fund ) and accumulation fund held with an external industry fund.

The SMSF asset comprises an investment property and a cash management account with a small balance.

He is unable to meet the minimum 5% withdrawal amount each year, as the net rental income does not reach that level.

My question is, can he rollover money from the external accumulation fund into the SMSF to meet the 5% withdrawal requirement and if not am i right in saying that his only option is to sell the property?

Thank you.

2 comments

Comments (2)

May 12, 2023

Possibly draw funds as pension then recontribute and do this a few times? Or maybe it can be done once in June. Subject to an ability to contribute.

THE AUDITORS INSTITUTE

May 12, 2023

Hi WL

Thanks, yes your client could rollover money to his SMSF and use this money to pay the minimum pension. This is on basis that the industry fund can rollover an amount to the SMSF.

Another option would be to move the SMSF from pension mode to accumulation mode and then it would not have to sell the property as there would be no pension payable.

If the member is under the total superannuation balance of $1,700,000 they could make tax free contributions (subject to the cap rules) as well given they are under 75 years of age.

A further option would be to reduce the amount in pension mode in the SMSF to being based on the amount of rental income that is received and can then be paid out as a pension on an annual basis.

Regards

SMSF AAA