A Lump Sum Benefit Withdrawal is simply a payment from an SMSF in a Lump Sum. This is different to an SMSF withdrawal paid out over a period of time, like a Pension or a Transition to Retirement, also known as TTR. A Lump Sum benefit is a one-off payment from the SMSF to a Member who has satisfied a condition of release – for example, age criteria met, retirement, death or Lump Sum payments for a deceased Member.
Pension payments are required to be paid in cash, however Lump Sum payments have the option of being taken out in cash or in-specie. The term “Lump Sum” is defined in thesuperannuation legislation [SIS Reg 6.01(2)] as “including an asset”, which means lump sums can be paid in-specie. This gives you the option of taking out a Lump Sum payment in the form of an asset, such as shares or property. This is helpful because it removes the time-consuming process of liquidating your assets into cash in order to make pension payments.
Generally, you are eligible to access a Lump Sum withdrawal without restrictions once you have turned 65 years old, or once you have reached the preservation age and you are retired.
If you have commenced a Pension from your SMSF, you can still take out Lump Sum withdrawals once you have turned 65 years old, or you are between the ages of 55 and 64 and retired. There is no restriction to the amount that you can take out as a Lump Sum payment from your SMSF.
The tax consequences of taking more than $200,000 (for 2017-18 and indexed each year) as a Lump Sum is discussed below.
To download a Lump Sum Pension Minute template, please click on the link below:
When making a Lump Sum payment to Members, the SMSF is required to register for PAYG as soon as they know tax is to be withheld from the Lump Sum payments or income streams.
There are 2 scenarios that can happen:
For more detailed information on how tax is applied on benefit payments, please refer to table A on page 4 of the Schedule 33 – PAYG withholding (ATO).
Please also see the ATO website for Schedule 12 – Tax table for superannuation lump sums.
To withdraw from your super as a Lump Sum, you will first need to determine the components of your super balance. Your SMSF balance may consist of preserved, tax-free, taxable and un-taxed components. Depending on what the tax components are, you may want to consider what the best retirement strategy is for you and your SMSF before you withdraw a Lump Sum. After you have the information required to process a Lump Sum withdrawal or Pension payment, you will need to complete the following:
From 1 July 2018, the Tax Office introduced a new reporting regime for Members with Pension accounts, this is referred to as TBAR. If Members take out a Lump Sum withdrawal, it should be reported to the ATO by lodging TBAR. When instructed, we can lodge a TBAR on your behalf.
Please see our TBAR page in the link below for more detail on the reporting events and times frames.
We are Melbourne based with clients throughout Australia. Our SMSF administration service is mostly paperless. This enable us to charge a fair fee, resulting in a good value-proposition for you.
Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.
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