Paying Benefits

Supercorp provide the administration support required by SMSF Trustees to ensure benefits are correctly accrued, calculated, preserved and paid. Benefits accrue in your member account within the fund over time, and are comprised of contributions, rollovers, investment earnings and the proceeds of any insurance policies.

Benefits in a regulated SMSF can be paid where the member of the fund has:

  • Retired permanently from the workforce at or after their preservation age (see table below); or
  • Commenced a retirement income stream; or
  • Left employment after age 60; or
  • Reached age 65; or
  • Died; or
  • Suffered permanent incapacity as defined by the Superannuation Industry (Supervision) Act 1993; or
  • Satisfied severe financial hardship requirements; or
  • Received special leave from the Australian Prudential Regulatory Authority; or
  • A balance of less than $200; or
  • Been an eligible temporary resident and is permanently departing Australia and is not an Australian or New Zealand citizen.
Member Born Preservation Age
Before 1 July 1960 55
From 1 July 1960 to 30 June 1961 56
From 1 July 1961 to 30 June 1962 57
From 1 July 1962 to 30 June 1963 58
From 1 July 1963 to 30 June 1964 59
After 30 June 1964 60

A member’s benefits in a fund are subject to preservation rules under Superannuation Law. The payment standards of Superannuation Law work with the sole purpose test and the preservation rules.

Trustees must ensure monies in the fund are only paid to members in appropriate circumstances.

Cashing Restrictions

The law prescribes that benefits may only be paid when a‘condition of release’ is met. The conditions of release which are as generally listed above, are the nominated events under Superannuation Law which a person must satisfy to enable them to withdraw their preserved benefits.

Effective from 1 July 1999, in general terms, all new contributions and all investment earnings are required to be preserved. Unrestricted non-preserved benefits may be accessed at any time.

Crystalisation

From 1 July 2007 all previous components of superannuation benefits are to be rolled into two new components known as (1) Taxable component, (2) Tax-free component. This is referred to as ‘Crystallising’ your benefits.

The new Taxable component will incorporate the previous Post 83 component and the Non-qualifying component. The new Tax-free component will incorporate the previous Pre 83 component, the previous Undeducted Component, along with the Concessional, Invalidity and CGT components.

All superannuation members will have received a statement from their superannuation fund, detailing these two new calculated components as at 1st July 2007. Fund administrators were given 12 months to complete this task from 1st July 2007. After 1 July 2007, all superannuation benefits payable as a pension or lump sum will be drawn in proportion from these two new components (you can no longer choose a particular component).

Lump Sum (Cash or Equivalent)

If you satisfy a condition of release and wish to have your benefit paid, simply write to Supercorp detailing the condition of release and the amount you would like to be paid. You may receive your benefit in the form of a lump sum payment of cash or assets (in specie transfer). If you choose to take your benefit as assets, transfer costs such as stamp duty and CGT will be deducted from your member account in the fund. If you take the benefit as cash, CGT may still apply if the fund has to sell assets to raise sufficient cash.

Unlike other forms of superannuation, where you may feel you need to get your money out to keep it under your control, SMSFs are controlled by you (as Trustee) so you can choose how much lump sum payment you need for a particular purpose and leave the rest in the fund earning investment returns in a tax advantaged environment.

Lump sum payments are subject to different income tax rates depending on the age of the member and the components of the benefit. The following table details the tax rates which apply:

Components Aged between Preservation Age and 60 Aged over 60
Taxable Component First $150,000 is Tax-free the balance is taxed at 15% plus Medicare Levy No Tax to Pay
Tax free Component No Tax to Pay No Tax to Pay