SMSFs urged to make pension payments as 30 June looms
SMSF clients planning to make pension payments or contributions via electronic fund transfers will need to do so by Friday, 26 June, to ensure they’re counted for this financial year, says an SMSF services provider.
With 30 June falling on a Tuesday this year, Heffron senior SMSF specialist Alex Denham recommends that SMSF clients place electronic fund transfers (EFTs) by Friday, 26 June, to allow time for the transaction to hit the super fund’s bank account.
In an online article, Ms Denham said if members wait until 29 or 30 June to make their contributions, it’s safer for them to do so by giving a cheque to the fund trustee (if possible) rather than doing it by EFT. The trustees must present the cheque as soon as possible, she said.
In terms of pensions, she reminded SMSF professionals and trustees that, as a general rule, a pension is only considered to be “paid” by EFT when the money appears in the recipient’s bank account.
“Again, to be safe, we recommend SMSF trustees order the EFT on Friday, 26 June, to be on the safe side,” she said.
“Alternatively, where SMSFs have a chequebook, a cheque in the member’s hands before midnight of 30 June will be a pension payment in 2019–20 so long as there is enough money in the fund’s bank account to cover the payment, and the member presents the cheque promptly.”
It is vital that trustees ensure the minimum pension rules are met by 30 June, she stressed, as the consequences of underpaying can be major, including loss of precious tax concessions that many super funds paying pensions receive.
She also reminded SMSF trustees that pension payments cannot be made in the form of a transfer of assets out of the fund into the name of the member.
“Such transfers are called ‘commutations’ and don’t count as pension payments. Not all members can take commutations from their pension,” she said.
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.