What are they doing to super?

[sptrawler]

A super question for learned members.

If a pension is commenced at 57 years old, and the 4% minimum drawdown is $50,000, from a SMSF.

The fund balances dictate the $50,000 is made up of $20,000 taxfree and $30,000 from taxable components.

Therefore the taxable component requires payg witholding tax, for arguements sake, let's say that is $2,000.

When the fund pays the pension does it.

A) Pay the member $50,000 and hold a further $2,000 for the tax obligation.

B) Pay the member $48,000 and hold back $2,000 for tax obligations.

C) Pay the member $50,000 and the member pay the $2,000 tax obligation.

I know the easiest thing is ring the tax dept, however after sitting on the phone for 2hrs, I spat the dummy and hung up.

 

[Ves]

A super question for learned members.

If a pension is commenced at 57 years old, and the 4% minimum drawdown is $50,000, from a SMSF.

The fund balances dictate the $50,000 is made up of $20,000 taxfree and $30,000 from taxable components.

Therefore the taxable component requires payg witholding tax, for arguements sake, let's say that is $2,000.

When the fund pays the pension does it.

A) Pay the member $50,000 and hold a further $2,000 for the tax obligation.

B) Pay the member $48,000 and hold back $2,000 for tax obligations.

C) Pay the member $50,000 and the member pay the $2,000 tax obligation.

I know the easiest thing is ring the tax dept, however after sitting on the phone for 2hrs, I spat the dummy and hung up.

PAYG Withholding tax is worked out on the total pension payment (so it's total pension - tax = cash payment).

So assuming that the member wanted to the total pension to equal the exact minimum pension of $50,000 (and with the assumption that all of the PAYG tax calculations are correct) then the Fund would pay $48,000 into the member's bank account and pay $2,000 to the ATO on the next quarterly Instalment Activity Statement. To clarify the Fund pays the PAYG Withholding Tax not the member.

 

[sptrawler]

PAYG Withholding tax is worked out on the total pension payment (so it's total pension - tax = cash payment).

So assuming that the member wanted to the total pension to equal the exact minimum pension of $50,000 (and with the assumption that all of the PAYG tax calculations are correct) then the Fund would pay $48,000 into the member's bank account and pay $2,000 to the ATO on the next quarterly Instalment Activity Statement. To clarify the Fund pays the PAYG Withholding Tax not the member.

Thanks Ves, that's what I thought.
I find super an interesting subject, when I come up with a thought I try and work out the scenario.
The more I look into super, the more I realise it is an amazingly well thought out process, considering it is in its infancy.

As per usual, no one should take this as advice, just a chat on a forum.
I would ring the ATO before making definitive decissions.