Paying lump sum benefits from an SMSF

A Lump Sum Benefit Withdrawal is simply a payment from a SMSF in a lump sum, as opposed to a withdrawal paid out over a period of time, like a pension.

The decision of whether to take a lump sum or a pension from your SMSF benefits is mainly an issue of what your needs are, and the tax implications.

Lump sum withdrawals, depending on the components of your SMSF account and if you’re under age 60, might be subject to ‘lump sum’ tax.

Superannuation benefits can only be paid once you reach a ‘condition of release’. A condition of release can occur under a variety of circumstances dependent on age, death or incapacity.

The ability to pay yourself out of your super fund can start as early as age of 55 – either as a pension or by lump sum. Where you are age 60 or over, the payment of super benefits can be taken without a tax consequence. They don’t form part of your income. You don’t pay tax on them.

A member can receive lump sum benefits from a SMSF in cash or in-specie e.g. shares or property as long as the fund’s trust deed allows for this to occur.

ComponentsAged between Preservation Age & 60Aged over 60
Taxable componentFirst $175,000 (for 2012/13) is tax-free
the balance is taxed at 15% plus Medicare Levy
No tax to pay
Tax-free componentNo tax to payNo tax to pay

RELIANCE AUDITING SERVICES

Reliance Auditing Services is a specialist independent auditing services firm providing quality audits to SMSFs, companies, not-for-profits and AFS licensees all over Australia. Reliance Auditing places a huge emphasis on educating our clients to ensure they fulfil their reporting obligations.Call: 1300 291 060 or email info@relianceauditing.com.au.

DISCLAIMER: This information is an interpretation of rules, regulations and standards. It should not be considered as general or specific advice and neither purports, nor is intended to be advice on any particular matter. No responsibility can be accepted for those who act on the contents of this publication without first obtaining specific advice. Liability limited by a scheme approved under Professional Standards Legislation.