In an online update, the ATO said SMSFs should ensure they’re meeting their withholding obligations and that trustees need to remember to include pension income in their assessable income.
The ATO said a fund will have PAYG withholding obligations for the super benefits it pays to members that are under 60 and the benefit is an income stream or a lump sum.
It will also have PAYG withholding obligations for members who are under 60 and the death benefit is a pension which is a capped defined income stream where the deceased was 60 or over when they died. It will also have obligations where the members are 60 or over and the benefit is a pension which is a capped defined benefit income stream.
“Capped defined benefit income streams include life expectancy and market-linked pensions which were payable before 1 July 2017 and reversionary income streams paid to beneficiaries,” the ATO said.
“If you have pay as you go (PAYG) withholding obligations in 2018–19, you must provide your member with a PAYG payment summary by 14 July 2019 and lodge a PAYG withholding payment summary annual report with us by 14 August 2019.”
The ATO pointed out that funds must provide this information even where they are paying an income stream and the rate of withholding is nil.
“This allows us to ensure the individual pays the correct rate of tax once all their pension income from all their funds is taken into consideration,” it said.
“Members who receive a capped defined benefit income stream can use our defined benefit income cap tool to help them calculate how much income they need to include in their assessable income for the 2018–19 year and where they need to include it.”
Reminder: STP? Closely held entities get an extra 12 months exemption from this requirement. So by 1/7/2020 you need to have these funds set up with an Auskey (even though Auskeys will be phased out) and STP compliant software. Or arrange this with your BAS/Tax agent on a quarterly basis – the ATO have indicated that quarterly is an option arrangement for closely held. Don’t see anything about EXEMPTIONS for SMSF’s on the ATO’s list https://www.ato.gov.au/Business/Single-Touch-Payroll/Get-ready-for-Single-Touch-Payroll/Single-Touch-Payroll-exemptions/ But you can apply to the Government for a Deferral/Exemption. As if the amount of reporting for SMSF’s hasn’t been overburdened enough the past 2 years! Lets add more compliance & cost onto SMSFs (as well as all micro/small businesses!)
There was a concession for “closely held” taxpayers where the withholding was only for a related party. This usually extended the due date until the date the tax return was due for lodgement. Is this concession gone?
What if the member is an overseas resident over 60? Are their benefit payments reported regardless of age?