Self managed super fund is the one that gains a high popularity among Australian people. The main purpose of this fund is to provide its members with a retirement benefit when they reach the age of retirement. Commencing an SMSF pension from your super fund offer a lot of benefits for you as a member. One of the most obvious but still not the main advantages is your ability to commence accessing your super benefit after preservation age even if still working. The biggest benefit of commencing a pension from SMSF is that the SMSF tax rate effectively will reduce to NIL for all realized and income capital gains. However, according to SMSF specialists, people make a lot of mistakes when in comes to documentation. So here are some useful pieces of advice for you if you want to set up your SMSF pension without error.
First of all, you need to have the right age to commence a pension. This means you need to have reached the preservation age in the time when the papers say that your pension can start. People are making a huge mistake by assuming this when their first payment is made. This is a huge error and simply is not possible. The rule is clear and simple. You must have reached preservation age in order to start the pension.
SMSF accountants, advisors, and trustees must ensure the assets of the fund are valued at the market rates before the SMSF pension is calculated while also ensuring they are revalued at the end of the financial year. This is of main importance for determining the level of pension in the coming year. Timely documentation is vital to ensure that the pension actually commences when you want it. Usually, the pension start date is 1st July and the pension payment may be made quarterly or even six moths later in the year. What you should do here is to ask for a professional help from SMSF advisor and let them handle with all the documentation.
When commencing a pension from your SMSF, what also needs to be calculated are the taxable and the tax-free components. To calculate a tax-free percentage you need to divide the tax-free components by the total starting balance of the pension. The tax-free component should be shown in your pension kit and reaffirmed in your account. This component percentage becomes relevant upon a death of the last super fund member and can make an important difference to the tax paid by your dependents. Do not forget to check your last statement. If you have any doubts feel free to talk with your SMSF advisor or accountant.
Another important thing to know is that your pension account cannot receive new contributions during the year. Yes, you can make new contributions but you need to credit them to a separate account. Remember, you can have more pension account, but you cannot have more than one accumulation account. You have the option to stop the pension and add accumulation account and then start a new pension. According to the SMSF specialist, the best time to do this is at the end of the financial year.
However, there are a lot of things you need to know and keep in mind when setting up an SMSF pension. So, if you want to do the things right, your best bet is to consult with professional SMSF advisor and let him handle the job professionally and effectively without a mistake. Even if you feel that you have the knowledge to deal with all those documents on your own, never forget to talk with your SMSF advisor and ensure you are on the right path.