Changes have been made throughout the year regarding SMSFs and their pay-as-you-go (PAYG) withholding. As the end of the financial year and the due date for PAYG reporting approaches, SMSF trustees should be checking whether they are meeting new withholding obligations for capped defined benefit income streams paid to their members.
If you have PAYG withholding obligations in 2018–19 you must provide your members with a PAYG payment summary by 14 July 2019 and lodge a PAYG withholding payment summary annual report with the ATO by 14 August 2019.
SMSFs have PAYG withholding obligations for super benefits paid to members who are:
- Under 60 and the benefit is an income stream (pension) or a lump sum.
- Under 60 and the death benefit is a pension which is a capped defined benefit income stream where the deceased was 60 or over when they died.
- 60 or over and the benefit is a pension which is a capped defined benefit income stream.
Capped defined benefit income streams include life expectancy and market linked pensions which were payable before 1 July 2017 and reversionary income streams paid to beneficiaries.
SMSF trustees who are paying a capped defined benefit income stream to a member must ensure to meet all obligations. These include registering for PAYG, providing your member and the ATO with payment summary information, and making sure to comply with the withholding obligations of your activity statement. By doing this, the ATO can ensure individuals are paying the correct rate of tax once all their pension income from all their funds is taken into consideration.