The strategy To make sure my super pension is hunky-dory for June 30.
The strategy To make sure my super pension is hunky-dory for June 30.Do I need to do that? While most of the tax and super strategies recommended at this time of the year revolve around putting money into super, June 30 is also an important date for people taking a superannuation pension. The head of wealth management at HLB Mann Judd, Michael Hutton, says people with self-managed funds, in particular, need to ensure they have taken the minimum annual income required by the government.This year the minimum pension draw down has been reduced by 25 per cent to take account of ongoing volatility in investment markets. That means if you're under 65, you're required to receive a pension this year of 3 per cent of your account balance as at July 1, 2011. If you're between 65 and 74 the minimum is 3.75 per cent between 75 and 79, 4.5 per cent 80 and 84, 5.25 per cent 85 to 89, 6.75 per cent 90 to 94, 8.25 per cent and 10.5 per cent if you're 95 or older.These reduced limits will also apply next year.Why is this important? Hutton says if you don't make the minimum pension payment, your fund will be in breach of its obligations and will lose its tax-free status. So instead of paying no tax on its earnings for this financial year, it will be treated as a non-pension super fund and taxed at up to 15 per cent.Public pension funds typically require you to elect upfront how much pension you want and how regularly you want to be paid.But Hutton says it is not uncommon for people in self-managed funds to make a single payment at the end of the financial year.Problems arise when you forget, or find the fund is short of cash.While there's not a lot of time left, Hutton says people who don't need the cash flow - and have already received their minimum pension - could also consider reducing any further pension payments due this year to protect their capital while markets are uncertain. Plans could also be put in place now to receive a lower, or minimum, pension next year.What if I'm about to start a pension? Is there any advantage in doing so before or after June 30? Hutton says drawing a pension makes sense, because once you've turned 60 you can "turn on" a pension regardless of your work situation. The proportion of your super fund providing the pension becomes tax-free - as is the pension income. You can also start a pension from age 55 but pension payments are taxable until you turn 60.However the Multiport technical services director, Phil La Greca, says any benefits from timing are minimal from a tax perspective, though there may be implications in areas such as social security. After June 1, he says, 11 months of the fund's income will be taxed this year anyway."There may be tax benefits if you have assets you want to dispose of," he says. "Starting a pension gives a proportional exemption on any capital gains but, generally, July 1 is as good a time to start a pension as any."If you already have a pension and want to make a lump-sum withdrawal, La Greca says you should think of doing it in June as your minimum pension for 2012-13 will be calculated on your July 1 account balance.Taking it before then will mean you need to take less pension next year.Is there anything else I should be doing? La Greca says this is the time to be looking at your fund's records and ensuring everything is in order for June 30. If contributions are still being made to the fund, you need to ensure they are within the contribution caps and deductible contributions are accounted for. Hutton says people who turned 65 during the financial year need to satisfy a work test if they want to make a concessional contribution.This requires them to do paid work for 40 hours over a 30-day period at some point during the year.La Greca says if you are receiving a transition-to-retirement pension, it should also be reviewed before June 30 to see whether it needs adjusting due to the lower concessional contribution cap for the over-50s that will apply from July 1.Twitter: @sampsonsmh