Rolling over a Pension Account

When setting up an SMSF, Members can rollover their existing superannuation balances from Retail/Industry/Other SMSFs into their new SMSF. These existing balances can include Accumulation and Pension accounts.

Rollover into an SMSF is typically from a Members Accumulation Account. To execute a rollover from your Retail or Industry Fund into your SMSF you will need to complete a Member Benefit Rollover Statement. Members will contact their existing Fund to arrange a rollover and deposit a cheque into their SMSF bank account. We give some guidance on the process involved on the rollover process:

You can also rollover your Pension balances into your SMSF. The most appropriate way to execute a Pension rollover is to commute your existing balance. The accumulation balance will be deposited into the SMSF and this will be used to start a new Pension account.

There is an alternative approach stating that Pension balances can be rolled over without a commutation, although this is quite a technical area. The ATO ruling is quite ambiguous and it is unclear if a Pension Account rollover will require a Commutation or not.

The term Commutation means reducing your Pension Balance. You can either put it into Accumulation Account or take a Lump Sum amount out of your Pension. The reason you would do a Commutation is to lower your Transfer Balance Cap, which is currently at 2 million.

Points to look out for before lodging a Commutation:

• A partial Commutation will not count towards the minimum Pension withdrawal.
• A Member must ensure that they have withdrawn the minimum Pension withdrawal before lodging a Commutation. The minimum Pension that is required to be withdrawn is based on a Member’s opening Pension Balance as of 1 July for the Financial Year.
• Exceptions to meeting the minimum Pension withdrawal before commuting are:
  • A Member has passed away;
  • Division 293 Tax payment;
  • Court order payment split

Please see here for more on what the ATO says regarding Commutations:

ATO Guidance on Commutations for SMSFs

Please see here for a review on the ATO ruling by an external lawyer firm:

1. The member must request a rollover and ensure that they are allowed to do so under the terms of their superannuation pension.
2. The Trustee can confirm their right to roll over the pension.
3. The Trustee issues a pre-payment statement.
4. If required, the Trustee will have to workout the Pro-Rate Minimum Pension Payment before the lump sum is paid.
5. The Trustee sells or transfers all assets to make the Lump Sum Payment.
6. The Trustee adjusts the original pension’s account balance.
7. If required the Trustee will need to issue all relevant exit information to the Member (Product Disclosure Statement).
8. Before rolling over it may be prudent for Trustees to get a Private ATO Ruling on the matter.

The ATO is silent on if a commutation is required for a Pension Account to be rolled over. This silence by the ATO may be viewed as if a commutation is not required but, our view is that a commutation is required to ensure that the Pension Account is rolled over and calculated correctly. Please see the Taxation Ruling by the ATO on this matter below:

When you’re ready, we can assist with setting up an SMSF and rolling over an existing Pension Account. If you have an existing SMSF and wish to rollover a Pension Account, we can take on your Fund and assist with the process please see our take-on process here: