Pension commutation decisions still causing confusion
Some SMSF practitioners are still unclear on which pensions to commute for clients in order to achieve optimal estate planning outcomes, according to a technical expert.
SuperConcepts’ Graeme Colley says the process of determining which pension should be commuted for clients who have more than $1.6 million in pension phase is causing confusion for SMSF practitioners.
“I think some SMSF practitioners are not fully appreciating which pensions they need to commute in full or in part for estate planning purposes,” Mr Colley said.
“The portion which has the highest tax-free component should remain in pension phase, and the pension with the highest taxable portion should be transferred over to the accumulation phase to get it down to the $1.6 million.”
The sole reason for doing that, he said, is for estate planning purposes.
“So when children who are older than 18 ended up as the recipients of that benefit it would be tax free to the extent of the proportion that’s tax free.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.