Excess payments commutation strategy FAQ

What is the Strategy?

The strategy involves ensuring that any payment from a superannuation fund for a member who is in retirement phase which is made after the minimum payment requirement has been satisfied is to be treated as:

• if the member has an accumulation account – as a payment from the accumulation account; or
• if the member has no accumulation account (either because they never had one or the accumulation account has been exhausted by previous withdrawals) or there are insufficient funds in the accumulation amount – as a partial commutation of the  pension (to the extent that the amount could not be paid from the accumulation account).

What is the benefit of the Strategy?

There are two benefits from applying this strategy: the first is the maximisation of super capital to which the earnings tax exemption applies; and the second is the generation of transfer balance debits.

Why does the Strategy work?

The strategy works because additional payments (ie payments made after the minimum payment requirement have been satisfied) are taken from the accumulation account or, if the accumulation account has been exhausted, then as partial commutations of the pension.

The document includes an example of the Strategy two options -  Option A and Option B, and outlines the benefit of each strategy, discusses if there is no further super capital available and whether it can be used if the Member has both pension and accumulation accounts, amongst others.

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