An SMSF is a great tax-effective way to save for your retirement benefit. The tax in an SMSF is generally
- 15% during the contribution stage
- 0% in the retirement stage
Tax effects during the accumulation phase
An SMSF generally pays tax at 15% for income in the SMSF but would not pay tax on roll overs into the SMSF or non-concessional contributions (after tax money) added to the Fund. There are generally 3 ways to add money into the SMSF which are:
Tax effects during the pension phase
Tax on investment returns
Tax on withdrawals
The tax effects on withdrawals are as follows:
- Pensions – Not taxable
- Transition to retirement – add the taxable component to your personal tax return
- Terminal illness withdrawal – not taxable
The ATO gives a summary of the tax affects of lump sum payments in the summary table here.
For more info on how your SMSF pays tax, please watch the video below.