There are many legalities surrounding self-managed super funds (SMSFs) and other super accounts that it can often be difficult to know where to start.
Here are the ins and outs regarding SMSF and super withdrawals to avoid steep financial penalties.
What are the rules?
SMSFs provide financial benefits to members in retirement and differ from other super funds in that they have up to four trustees who are solely responsible for the account.
If you are aged 60+, any lump sum withdrawal from your SMSF or super fund is tax-free. To achieve your superannuation benefits, however, you must be retired or turn 65.
Retired in this instance means that you agree not to work more than 10 hours a week going forward.
You will only pay the taxable portion of any lump sum you take out. This includes anything that is not related to non-concessional contributions that you have made, such as employer contributions and salary sacrifice contributions.
What is a lump sum?
What is this term that’s cropping up all the time? A lump sum is a single payment accessed from your super account which is not a pension payment. In the event of no extenuating circumstances, you can make these withdrawals once turning 65 or retiring.
At what age can you withdraw money from your super and SMSF?
Super accounts are generally designed to fund your retirement. So, this means that it is only possible to access funds once you have reached your ‘preservation age’ and when you’ve permanently retired. Reaching the age of 65 can also function as a withdrawal condition.
Your ‘preservation age’ is the earliest age you can be to access your super account, and it varies for each individual. It is calculated based on your birth date.
Only through these conditions can you withdraw money from your SMSF or super without cash restrictions.
In what situation can you withdraw money early?
There are some grounds on which you can access your super or SMSF funds early. Granted, they are limited.
The Australian Taxation Office (ATO) allowed SMSF and super account holders to release themselves from their accounts given unprecedented circumstances.
This early release program closed on 31st December 2020, and payments were made throughout January.
However, it’s worth looking out for any other information the ATO may release in relation to super funds during this time.
You must have received government income support payments continuously over the course of 26 weeks and be struggling to pay for necessary family expenses to access SMSF or super funds early.
There are limits as to how much money you can access, with the minimum amount being $1,000 and the maximum being $10,000. This money is taxed as a super lump sum. Also, you can only make one withdrawal in a 12-month period.
To withdraw money on financial grounds, you must contact your super provider.
Temporary incapacity means that you are currently unable to work, or are currently working fewer hours than usual because of physical or mental health conditions.
Money from your super or SMSF will be paid in regular instalments, known as an income stream until you are able to return to work properly.
Permanent incapacity works differently. It is recognised as a disability super benefit and can be received as a lump sum or as an income stream.
If you have a terminal medical condition, you can withdraw money from your SMSF or super as a lump sum.
To do so, two registered practitioners must agree that you are suffering from a condition likely to result in death within 24 months of your application. One of these practitioners must specialise in your illness or a related field.
Other instances in which you can access super money early include:
- Medical treatment or transport for you/someone under your care
- Making a payment on a home loan or council rates
- Expenses associated with the death, funeral or burial
- If your super account is less than $200 and you change employers
How expensive is a super or SMSF?
There are many things you should consider before opting for an SMSF over other super accounts.
Most importantly, one only witnesses cost-competitive investments with balances of around $200,000. In these instances, it operates a lot better than a retail or industry super fund.
For your SMSF to be cheaper to run than other super accounts, we generally recommend a starting balance of $500,000.
Do you have questions regarding super fund withdrawals? For more information on super funds and SMSFs, contact Charter Partners today. We offer accounting, taxation, and wealth management services in Brisbane, Gympie and Bundaberg. Call 1800 810 247 or email email@example.com.
Anthony McPhee, Principal
B.Bus (Accy) QUT | FCPA, SSA (SMSF Specialist Advisor with the SMSF Association) & Registered Tax Agent
Anthony has over 25 years accountancy, taxation and superannuation (SMSF) experience. He eagerly welcomes a challenge and his passion is in small business accounting, superannuation, consulting and taxation advice. He provides real business benefits for each of his clients and is well regarded for his succinct and accurate accounting skills. Anthony is also a self-managed superannuation fund (SMSF) specialist with Australia’s leading SMSF body, The SMSF Association.