Great reader feed-back from recent SMSF article - Tony Negline

Tony Negline

Last week in my DIY Super column for The Australian newspaper I wrote about an investor wanting to claim personal super tax deductions.

Because of the nature of the article I touched upon Transition to Retirement income streams and asset segregation when a fund contains accumulators and pensioners. The article dealt with a reader's question which asked if making contributions and beginning a new pension with those contributions each year was a good idea.

This article generated a surprisingly large number of responses. Here I provide edited versions of some of the questions:

1. 'If using the 'segregated system' do you know whether a separate bank account is needed? My auditor and accountant differ in opinions'

TN comment - I understand the logic of the separate bank accounts; it would make auditing the accounts easier. i would be worried about using the wrong bank account for income or other benefit payments.

2. 'I work full time, am over 65, (and I contribute to a SMSF) therefore the TRP has no meaning for me. Is this correct?'

TN comment - at age 65 the Transition to Retirement pension doesn't make sense but the idea of taking a pension might!

3. 'When mentioning contributions when in pension phase your article makes the statement: "there must be an exchange of paperwork between the super fund and the member. The paperwork must be done before each pension starts, otherwise the tax deduction is not allowed. What did you have in mind as being required here as paperwork?'

TN comment - the ATO has recently warned people claiming personal super tax deductions in a SMSF to complete this paper-work as their data-matching has identified problems. This is the old Sec 82AAAT Notices now called Sec 290-170 Notices.

4. 'What is your view on commuting the pension at the end of the tax year and then starting a new one with the revised balance [which includes the new proceeds from any contributions made throughout the year]'

TN comment - would a pension be deemed to have been commenced?

5. 'I have a question about tax deductible contributions and have rung ATO on three separate occasions and got three different answers. I am 65 years old and work part time and have met the work test rules of 40 hours in a 30day period to enable voluntary contributions to be made. My question is can these contributions be tax deductible having met this rather strange employment test and does the 10% rule apply to qualify for tax deductibility.'

TN comment - probably not enough detail to work out a good answer to this question; we would need to know more about how the work test was satsified.

7. 'My wife and I propose to start a pension fund with all current assets (cash plus equities) on the basis of an unsegregated asset system (as detailed in the article). Can we continue to maintain our current super (accumulation) fund within the accounts of our SMSF? This way we can continue to make our personal super contributions plus any non-deductible contributions (excess cash plus re-contribution from pension) into this fund. If we proceeded on the above lines, how will imputation credits be treated? If we include the equities in the pension fund then will we loose their advantage?'

These are all fascinating questions and give us all some idea what practical issues most SMSF trustees face on a daily basis. Space doesn't allow me to discuss each of these questions.

In all seriousness reader feed-back is one of the best aspects of writing!

Last week I said that I would discuss Argus and Hermes. My apologies, I will do this next week.

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