Q: I am 67 and work part time, so I qualify to make concessional (before-tax) contributions to our SMSF. I am already receiving an account-based pension from my SMSF. The new contributions I make will have to go into an accumulation account. How long do I have to wait before our SMSF can pay another account based pension from these new funds? Can I start the new account based pension as soon as I meet another ‘condition of release’, i.e. stop my part-time employment?
In relation to satisfying a condition of release, when an individual is already over the age of 65, any superannuation benefits held by that member can be withdrawn at any time (see SuperGuide article Turning 65 and super: A Super Guide). Note there are special timing rules in place when an individual makes concessional (before-tax) contributions and then intends to start a super pension using those contributions. If you’re considering such a strategy, and you’re planning to claim a tax deduction for those super contributions, then I strongly suggest you read the SuperGuide article Tax-deductible contributions: timing the start of pension is essential, which explains these rules.
Depending on your circumstances, it may be possible to commute (convert back to accumulation phase) the first pension and start a new pension with the combined amount but such a strategy will affect the tax-free and taxable components of your pension. Anyone considering such a strategy should talk to an adviser who knows a lot about SMSF pensions. You may also wish to refer to the relevant page on the ATO website explaining what happens when you stop and restart a super pension (see this link).
SUPER ALERT! Since 1 July 2017, the earnings on assets financing a transition-to-retirement pension (TRIP) are no longer be exempt from tax, because a TRIP is no longer considered to be in retirement phase (see SuperGuide article
Did tax kill the transition to retirement magic pudding?). Earnings on fund assets for super pensions in retirement phase are exempt from tax., Also, since 1 July 2017, Australians can transfer no more than $1.6 million into pension phase (see SuperGuide article Retirement phase: A super guide to the $1.6 million transfer balance cap).
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