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I have a question regarding the benefits of “pension” versus “accumulation” phase for our SMSF.
My wife and I have both reached our preservation age, and have both retired permanently from the workforce. Our only income is from a small share portfolio held outside our SMSF. The income is below the tax threshold, so no tax is paid on the earnings. We sell down some shares if we need extra money to live on.
Our SMSF however, is paying 15% tax on earnings, and that is going to be much more than we are paying outside of super. Would there be any advantage in selling off our existing portfolio and contributing it to our SMSF (within the statutory limits of course) and then converting to pension phase?
A: Thanks for the question.
If I have interpreted your description correctly, you aren’t currently paying any tax on your share portfolios outside super. If this is the case, leave it the way it is – there is no advantage in selling it off and transferring the monies into super. You are already in a zero tax environment – and why potentially trigger a capital gains tax liability?
Separately, however, you should seriously consider moving your super fund from the accumulation phase to the pension phase, and reducing the tax rate to 0%. Both of you should start taking a pension.
