Gov’t relents on pensions in SMSFs…
By Jason Spits
THE Federal Government has backed down on plans to immediately remove complying pensions from self-managed superannuation funds (SMSF) with the addition of a transition period allowing use of the pensions for retirees until at least June 30, 2005.
In announcing the changes, Assistant Treasurer Senator Helen Coonan says the transition period and a review of defined benefit pensions in SMSFs tackled “concerns arising from any unintended consequences of the Government’s move to enhance the integrity of the superannuation system”.
The Government is presenting the transition period and review as part of a three-pronged strategy, which also includes the new complying market-linked income streams available from September 20.
Under the transition period, members of an SMSF as at May 11, 2004, who retire will still be able to access a complying lifetime or life expectancy pension until mid-2005. The Government says the one-year period should allow enough time for SMSF members to look at the market-linked income stream option while still under the current structure.
The proposed review will look into the feasibility of small funds providing a defined benefit pension without the prudential and tax avoidance risks and will be headed by Treasury with input from the Australian Government Actuary, the Australian Taxation Office, the financial services industry and other stakeholders.
It will also consider the demand for complying defined benefit pensions and if they can be provided by SMSFs in a way that does not negatively affect the retirement income and tax system.
Complying pensions were originally removed from the funds under changes announced in this year’s Federal Budget after concerns were raised that SMSFs were being used for tax avoidance.
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