Tax terminology causing trustee confusion

Tax terminology causing trustee confusion

References to tax-exempt investment returns as ‘tax-free pensions’ have led some SMSF trustees to mistakenly assume their pension money will be subject to the 15 per cent PAYG tax, according to Australian Executor Trustees.

Australian Executor Trustees senior technical services manager Julie Steed says many retirees who are over the age of 60 are in receipt of a tax-free pension by virtue of the fact that they’re over 60 and there is no PAYG tax.

“Some of those people have been confused and thought they were going to be taxed at 15 per cent, and not understood that it’s taxed at the fund level,” Ms Steed said.

“It’s the exempt current pension income that appears above the $1.6 million. They simply thought that by virtue of being over 60 that PAYG was going to be impacted.”

Ms Steed said she has also come across advisers who believed it was the 15 per cent tax offset that a member receives on their income stream between preservation age and age 60 that was going.

“I think [we need to be] consistent with the terminology of tax-exempt investment returns versus tax-free pensions,” she said.

Tax terminology causing trustee confusion
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