Ask Noel
Is there any way to change to an allocated pension or to withdraw my money entirely? Centrelink has said penalties, if any, would be minimal as I was on the assets test for such a short time; the ATO says it's not up to them; and my TAP provider says I cannot be released from the contract.
There are limited circumstances in which this type of income stream can be commuted, and they do not apply in your case - financial hardship is not an exception. It may be possible to roll it over to another complying income stream but you would need to take expert advice first. It could result in you losing the 50 per cent asset test exemption, but it may enable you to get more favourable treatment under the income test.
I am 61 and started a self-managed super fund in 2003. I would like to terminate my SMSF, and return everything back to my name. My accountant tells me I will have to retire if I want to close my super, but the costs are too high to run the SMSF. Is there a solution?
You cannot withdraw the money from superannuation at age 61 unless you trigger a condition of release. However, a simple way out may be to roll the balance into a retail fund. Take advice, because it may be necessary to cash in your fund's assets before the balance is rolled over, and capital gains tax could be payable unless you are in pension phase. If you are not in pension phase now you could start a transition-to-retirement pension which would put you into pension phase. Expect to pay around $3300 to wind up your own fund.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice before making decisions. Email: noelwhit@gmail.com.
My mother passed away this year, leaving a parcel of Westpac shares to her grandchildren. They would like to find out the capital gains tax applicable. She acquired the shares in the days of St George Building Society and I, as executor, have not been able to locate any original share certificates that would help me estimate the original cost base. Some of the shares would have been granted to members of the building society, some as dividend reimbursements and others were bought about the early 1990s. If the shares were sold, how would you calculate the CGT in the absence of any personal records?
Your problem is not uncommon. Julia Hartman, the co-author with me of Winning Property Tax Strategies, states that she has seen the Tax Office take a fairly lenient approach on this and allow the cost base to be the market value at the date of death even though they are post-1985 shares. (Any shares your mother acquired before September 19, 1985, will be inherited at a cost base of market value at the date of her death anyway.) The secret is to be up front with the Tax Office right from the start and write to them and ask for their advice. List the shares held and make sure you get a written reply.
Frequently Asked Questions about this Article…
A Term Allocated Pension (TAP) is a type of superannuation income stream. When TAPs were encouraged by government policy, investors could get a 50% reduction in the assets test on the amount invested (reducing assessable assets for Centrelink). The article notes that rules later changed and some holders were moved from the assets test to the income test.
Commuting a TAP is only allowed in limited circumstances and financial hardship is not an automatic exception. It may be possible to roll the TAP into another complying income stream, but you should take expert advice first. A rollover could cause you to lose the 50% assets-test exemption, though it might give more favourable treatment under the income test. TAP providers can also refuse release under contract terms.
According to the article, once the concession ends you could be forced to take ever‑increasing payments from the TAP. Any amounts in excess of the non‑assessable portion can reduce your Centrelink payments—potentially losing half of those excess payments under the income test.
You generally cannot withdraw money from super at age 61 unless you meet a condition of release. A practical option described in the article is to roll the balance into a retail (comparable) fund, but you should take advice because you may need to cash in SMSF assets before rollover and capital gains tax could apply unless you’re already in pension phase.
Yes — the article explains that if you are not currently in pension phase you could start a transition‑to‑retirement pension, which would put you into pension phase and may make it easier to roll or restructure your super. You should get professional advice about tax and practical steps before doing this.
The article suggests you can expect to pay around $3,300 to wind up your own SMSF, although actual costs can vary depending on circumstances and any required transactions to realise assets.
The article notes the Tax Office has sometimes taken a lenient approach and allowed the cost base to be the market value at the date of death even for post‑1985 shares. Shares acquired before 19 September 1985 automatically get a cost base equal to market value at date of death. If records are missing, contact the ATO in writing to seek their advice and keep a written reply.
List the shares held and prepare a clear letter to the ATO explaining the missing documentation and asking for guidance on the cost base. The article recommends being upfront with the Tax Office from the start and obtaining a written response — this can help establish an acceptable cost base for CGT purposes.
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