The following example demonstrates how an account in Accumulation mode can transfer a portion of the funds to Pension mode during the course of the year:
Sam and Jo are members of a superfund, and each has $100,000 of preserved balances, of which $20,000 or 20% is tax-free component.
The program checks to see that the Tax Free component has been crystallised and makes sure the totals are equal.
On 1 July 2015, Sam goes into pension mode. The "Pension" window will show the current breakdown of her balance. The 20% tax-free, and the preserved balance made up $20,000 tax-free.
Note: There is no tax payable on the income or capital gains derived by a SuperFund for the 'pension' part of the fund. The pension received by a member from a superfund is tax-free; however, the underlying break-up of tax-free and taxable remains the same. The reason this is done is that if the funds have to go into a deceased estate, the breakdown is needed. During the course of the pension, pay-outs will be tax-free.
Sam now needs to decide how much of the $100,000 she wants to receive in her income stream. In this example, we will choose $60,000, and she will select to take the $60,000 out of her preserved funds, as that is all she has.
The program will automatically calculate the % tax-free and non-tax-free based on the balances.
Note: SuperFund uses the allocated actuarial percentage to determine the portion of the current year's share of income or loss to attribute to the pension phase.
If there is just one member and the fund is totally in pension mode, the actuarial percentage will be set at 100%, with the total share of income or loss being attributed to the pension. If not, an actuary will usually supply the percentage, as this calculation can be difficult, as it has to consider factors such as the date(s) the portion of the fund went into pension mode, the asset(s)or portion(s) thereof that are in pension mode etc.
Sam's Accumulation account is left with $40,000, of which 20% is still tax-free.
And her Pension account has $60,000, of which 20% is still tax-free.
The SuperFund makes a pension payment of $1,000. From the Transaction menu, point to Expenses and click Pensions.
Once the pension payment is posted, the members' report for Sam's Pension account will look as follows.
