Care required in paying super benefits
Generally, before SMSF trustees pay a member’s super benefits, they need to ensure that:
Benefit payments to members who have not met a condition of release are not treated as super benefits. Instead, they will be taxed as ordinary income at the member’s marginal tax rate.
If a benefit is unlawfully released, the ATO may apply significant penalties to:
The ATO may also disqualify the trustee(s) involved.
Investment restrictions and other rules that apply to SMSFs in the accumulation phase continue to apply when members begin receiving a pension from the SMSF.
Where a member has met a condition of release, the trustee can either pay the benefit as a lump sum or super income stream (i.e., a pension). If a member has died, the trustee will generally pay a death benefit to a dependant or other beneficiary of the deceased, subject to the applicable rules.
If you require any further clarification on this, please contact our office on 02 4943 4475.
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