Skip to main content

How do I treat a lump sum payment to a member who is still in accumulation phase

Dianne Horton

What entries do I need to do to account for a lump sum payment to a member who has retired, is aged over 60, but has not yet started a pension and does not to want to start a pension yet 

1

Comments

6 comments

Date Votes
  • Official comment
    Andre Jones
    • Edited

    Hi Dianne, 

    Thank you for reaching out in the Community. From what you’ve described, this is referred to as a contribution split, where a member makes a lump sum transfer to another member’s accumulation account within the fund.

    To record this contribution split in Simple Fund 360, you can follow the steps below:

    1. Ensure all fund transactions are processed up to the date of the Lump Sum Payment
    2. Create entries up to the day before the contribution split occurs.
    3. Once entries are created, prepare a journal.
    4. For the first line of the journal, select account 46000 (Benefits Paid/ Transfers Out) for the member who is making the Lump Sum Payment. In the More Details panel, enter the rollover details.
    5. For the second line, select account 28500 (Transfers in) for the member who is in the accumulation phase and is receiving the contribution split. In the More Details panel, allocate the amount to the appropriate taxable component to reflect the original contribution.
    6. Post the transaction. 

    If you would like a further guide on how to do this, we go through an example on this in our Level 3 training manual, on page 38.

    https://files.bglcorp.com.au/Training-Manuals/SF360Level3.pdf

    If you have any further questions, please let me know. 

  • Dianne Horton

    Hi Andre

    thanks for the response but I don't think I made myself clear enough - so here goes...

    I am definitely not referring to a contributions split but rather the member wants to simply take some cash out of the accumulation account.

    I am referring to the situation where a member has reached age 60 and is retired so meets a condition of release. The member currently only has an accumulation account and wants to  take a lump sum of (eg) $150,000 from that account. I understand this will be non taxable to the member as they are over 60 and retired. This will still leave a balance in the accumulation account which will be converted into a pension account at some stage in the future. 

    The members most recent members statement shows an unrestricted non preserved amount which is lower than the proposed lump sum. I'm not sure if this needs to be altered in some way prior to taking the lump sum. From what I can tell your steps 1 to 3 above are required but after that it will be different. The training manuals don't seem to show any examples of taking a lump sum prior to pension. Many thanks

    . 

    0
  • Andre Jones

    Hi Dianne, 

    Thank you for responding and providing additional clarification to your scenario. 

    As the member is aged over 60 and retired, they have met the full condition of release. This allows the member’s benefits to become unrestricted non-preserved. You can update the member's taxable components using the Member Dashboard - Update Balance Components - Member Dashboard. 

    To record the Lump Sum Payment, you can follow these steps: 

    1. Update the member’s components as outlined above.
    2. Create a new journal to record the payment by debiting account 46000 (Benefits Paid / Transfers Out) for the member’s accumulation account and crediting the bank account for the amount paid.
    3. Within the transaction, open the More Details panel. This will display the Rollover Payment Details. Under Type of Payment, select Cashing out / Benefits Paid. Complete the remaining rollover details as required. The member components applied will reflect those updated in Step 1.
    4. Post the transaction.

    The remaining balance will continue to sit in accumulation and can be converted to a pension at a later date. 

    Additionally, you can view Electronic Lodgment of the PAYG Payment Summary: Superannuation Lump Sum to learn how to lodge this form within Simple Fund 360. 

    Please let me know if I can be of further assistance.

     

    0
  • Dianne Horton

    Hi Andre

    thanks your information has been very helpful. One last question (hopefully) - Is it necessary to lodge a PAYG payment summary if the lump sum is made to a retired person over 60 and there is no untaxed element in the fund. In other words there section B payment details would just show the date of the payment and pretty much nothing else? 

    The ATO website says to "Use this form if you have paid a super lump sum to any of the following payees:

    • a person under 60 years old
    • a person 60 years old and over where the payment contained a taxable component with an untaxed element ..."

    So it appears its not necessary but I am wondering if its required as some sort of processing by BGL?

    thanks again

    Dianne

    0
  • Andre Jones

    Hi Dianne, 

    Thank you for your response. 

    Yes, you are correct. You do not need to prepare or lodge a PAYG Payment Summary for this lump sum, as the member has no taxable components and there would be no amounts to report on the form.

    Which follows the ATO guidelines based on these articles: 

    That said, some accountants do still choose to prepare the payment summary in these circumstances for record-keeping or internal documentation purposes.

    For this reason, Simple Fund 360 continues to allow the Payment Summary to be prepared, even though it is not mandatory from a BGL processing or ATO lodgement perspective.

    I hope this helps. 

    0
  • Dianne Horton

    Hi Andre 

    yes that was very helpful. Thanks again for all the advice you have given

    Regards Dianne

    0

Please sign in to leave a comment.

Didn't find what you were looking for?

New post