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SMSFs must remember to pay pensions

Julia Newbould  |  16 Feb 2010Text size  Decrease  Increase  |  
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Neglecting to pay super payments from your SMSF could result in tax concessions being put at risk, according to a tax expert.

Partners Superannuation Services director Martin Murden says he has noticed an increase in SMSFs not paying members pensions or not paying them on time.

"It's highly unlikely that this is being done intentionally. Many trustees contravening this legislative requirement are unaware they’ve failed to make the necessary minimum payments and only discover this when their financial year-end accounts are being prepared," Murden said.

"Unfortunately it is a bit late in the day to take the necessary corrective action. To comply with SMSF legislation, the minimum pensions must be paid in the year they're due."

Funds which fail to make the appropriate payments may be deemed ineligible for a tax exemption on any income earned by the fund. "Unfortunately for some, this could mean an unnecessarily large tax bill," Murden said.

SMSF rules state that once a fund member reaches preservation age (currently 55) and begins drawing a superannuation income stream pension, it is crucial the minimum pension be paid each year.

The minimum pension starts at 4 per cent of a member's account balance for those aged 55-64 and increases after 64. However, this figure has been reduced to 2 per cent for the 2008/2009 and 2009/2010 financial years.

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