Self-Managed Super Fund Payments and Conditions
Planning for Retirement
Before you retire, plan ahead so that your funds are ready to make super payments once the time has come. Decide on how you will get your super fund payments, either through income streams or lump sum payments.
Review your fund investments and make sure that you have enough cash or liquid assets to make payments to your members. If you decide to pay in income streams, minimum annual amounts should be paid. If your fund cannot pay, it will not qualify for tax benefits.
Planning ahead by having more cash available in SMSF or selling properties when the markets are stronger may be an option to get returns on investment. Trustees should have regular meetings to plan for future super fund payments. Minutes of the meetings should also be kept on file. Otherwise, you might have to pay thousands in fines.
Retirement and Conditions of Release
Conditions should be met before a trustee is allowed to access the superannuation.
When a trustee turns 65, he or she can access the super at any time either as a lump sum or through an income stream without restrictions.
Aside from retirement, you might also be qualified to access the funds if you have stopped working, intend not to work again and have reached your preservation age. Members who are under 65 but have reached their preservation age, are allowed to receive a transition to retirement income stream even if they are still working. However, the amount paid to them each year is limited under the law. When a member dies, their super is released to their beneficiaries.
Specific rules apply to the payment of these benefits on certain uncommon conditions of release.
You should contact ATO if you think you meet one of these conditions of release. They might help you access your super. Once a condition is met, check if payment is allowed under the fund’s trust deed. If the fund pays benefits and the condition of release are not met, penalties might have to be paid.
Seek professional advice before paying a benefit and also regarding tax considerations.
What Happens When A Member Dies?
SMSF members can nominate individuals whom they want their benefits to go to when they die. A legal personal representative may be appointed as trustee to look after the interests of the deceased member until his benefits are paid to his or her beneficiaries.
The remaining members of the SMSF must make sure that the fund still meets the requirements of an SMSF. If the fund has limited cash available to pay the benefits of the deceased trustee, assets might need to be sold to pay for them.
Binding death benefit nominations guide the trustees to pay the benefit to the legal personal representative or dependent. Without this nomination, the remaining trustees have the right to decide on how the benefits are distributed in consideration of the trust deed and super laws. Trust deeds must be followed even if they are different from the will of the member.
Death benefits can be paid to a spouse, someone who is in a close personal interdependent relationship, a child who is under 18, has a disability or aged between 18 and 25 and is financially dependent on the deceased.
The dependent can be paid a lump sum or through an income stream. Non-dependents will only be paid a lump sum. Lump sum benefits paid to dependents are tax-free but those paid to non-dependents are taxed. They are either paid in cash, shares or property.
A tax might need to be withheld by trustees from a death benefit. It is a complex process and depends on several factors. For trustees to withhold tax, they must register for PAYG withholding and complete ATO forms.
Disputes over the payment of death benefits may lead to costly court actions. To prevent these problems, clear guidelines should be set on the trust’s deed. Seeking advice from an SMSF auditor or professional can also help you get things right.
If you have more questions regarding self-managed super fund payments and contributions, talk to us. We’ll be glad to help you get to know more about SMSF, super fund payments, conditions and more!
Kingston Knight Audit are the Auditor Melbourne experts to contact when dealing with your trust account audit, SMSF Audit, financial statement audit, and internal audit requirements. Contact us today, Kingston & Knight Audit offers a free telephone consultation to establish how we can best help you achieve the assurance and compliance you require.