Commuting pensions before 1 July 2017 to avoid exceeding the $1.6 million transfer balance cap

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A member of a SMSF may need to take action before 1 July 2017 to ensure that they do not exceed the $1.6 million transfer balance cap by requesting the trustee of the SMSF to commute some or all their superannuation income streams to be rolled-over as an accumulation interest within the SMSF or withdrawn from the SMSF as a lump sum payment.

The member may not be in a position on 30 June 2017 to know precisely the value of the superannuation interests that support the superannuation income streams. One strategy to address this is for the member to make a request, which is subsequently accepted by the trustee of the SMSF, to commute their superannuation income stream(s) by the amount that the value of the superannuation interests that support their superannuation income streams exceeds $1.6 million.

 

 

Member Request for commutation of super income streams before 1 July 2017 in order to comply with the introduction of the transfer balance cap


Documents can be generated from the Reports screen for members requested that any excess balance over the $1.6 million Transfer Balance Cap be moved from Pension to Accumulation Phase.

Refer to $1.6 Million Pension Balance Letter and Minute for further details.  
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How to record partial or full commutation of super income streams before 1 July 2017 in order to comply with the introduction of the transfer balance cap


You can also refer to the following examples:

  • How do I do enter a commutation?
  • Can I record a commutation for multiple pension accounts in one process?

Simple Fund 360 allows you to record a commutation (e.g. full commutation, partial commutation, combine pension accounts, pension reset, pension rollback) using the Internal Transfer/Commutation Wizard. 

This can be done for single pension account or multiple pension accounts in bulk. 

  • Where do i find this?

From the Member list screen, select Member Transactions 

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  • Select who the commutation is for.
  • Here you can also select which pension accounts the commutations will be for
  • Commutations can either be for the full account balance and a partial amount
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  • Input the Date of the commutation
  • Select whether the amount(s) are being rolled back to an existing Accumulation Account (Existing Accumulation Account) or are being cashed out fo the super fund (Cash Out)
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  • If the Pension Account is being full commuted answer Yes to the question Is the entire balance being taken out? 
  • Otherwise for a Partial Commutation answer, No and enter the relevant amount
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  • Confirm Transfer and Save
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  • Review and Prepare Pension Commutation Documents

If you have selected Save & Close without preparing the commutation documents, you can re-prepare these documents from the Reports screen. These documents are available under the Letters/Minutes section.

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To select the date and member for the documents, select Options >> Settings prior to document preparation.

 

Example 1 


In June 2017, Claire has a single superannuation interest supporting a superannuation income stream in her SMSF that is valued at $2.1 million.

  1. Claire requests the trustee of her SMSF in writing to commute amounts on 30 June 2017 in excess of $1.6 million based on the value of the interest supporting her superannuation income stream valued at 30 June 2017. The trustee of the SMSF accepts the request which is documented. The Trustees use the $1.6 Million Pension Balance Letter and Minute for further details.  
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  2. In September 2017, the amount of the commutation is worked out by the trustee of the SMSF and is reflected in the SMSF's financial accounts for the year ended 30 June 2017 by the due date of the SMSF's annual return for the year ended 30 June 2017.

Simple Fund 360 allows you to record a commutation (e.g. full commutation, partial commutation, combine pension accounts, pension reset, pension rollback) using the Internal Transfer/Commutation Wizard.  

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