When an SMSF moves from the accumulation stage into paying an income stream to a member, there are tax benefits to be had.
But to be eligible, the fund must meet certain conditions.
Let’s take a look at what’s generally involved.
A member needs to make a written request to the trustee to start an income stream.
The member receiving the income stream payment must have met a condition of release; for example, turning 65.
The type of income stream being paid must be allowed under the law and your fund’s trust deed.
You need to value the income stream assets on the first day of payment, and on 1 July each year you continue to make payments. Make sure the minimum income stream payment is paid to the member each year.
You may have to withhold tax from some income stream payments. To do this, you’ll need to register for Pay As You Go withholding and complete some forms which you can get from the ATO.
If more than one member has a share in the fund assets supporting the income stream, you will need an actuarial certificate to work out the tax implications for your fund.
Even if all members are receiving an income stream, you still have to meet all of your fund’s obligations, including arranging the annual audit and lodging the SMSF annual return.
Planning ahead before you start an income stream and staying on top of the administrative tasks and record keeping will make it easier for your fund to meet all the conditions and enjoy the tax benefits.
Remember: this is a big step for your fund, so if you need help you should contact SMSF Options to help you get it right.
For more SMSF information, take a look at other ATO videos – or contact us here