Retirement
Investors blindsided by tax from super withdrawals
Australians running their own superannuation funds are being hit with surprise taxes due to a lack of understanding regarding what meeting a full condition of release means, a technical expert has warned.
Investors blindsided by tax from super withdrawals
Australians running their own superannuation funds are being hit with surprise taxes due to a lack of understanding regarding what meeting a full condition of release means, a technical expert has warned.
SuperConcepts non-executive director Stuart Forsyth explained that he is coming across a number of SMSF trustees who have decided to pull money out of their super fund and pay it back without realising that the commissioner might consider that to be assessable income.
What often happens in these situations, he explained, is that the member needs a lump sum and so they just decide to take it.
"There can be tax consequences in that which there wouldn’t be for a pension payment, so it’s really a question of paying attention to what you’re doing,” Mr Forsyth said.
SMSF practitioners, he said, need to be careful that their clients don’t become blinded by the regulatory issues and ignore the taxation issues.
“Regulatory issues are important, but tax is important as well,” Mr Forsyth warned.
Often, SMSF trustees will get caught in these situations when they hit age 60, the director said.
“Some trustees think, ‘Well, I’m 60 years old, so I can take my super’. Well, it’s not quite that simple,” Mr Forsyth cautioned.
“If you’re 65, then it’s fine, but at 60, its tax-free if it’s legitimate, but it’s taxable if you haven’t met a full condition of release and you take more than 10 per cent out of a TRIS. So, there are some traps out there and some care is needed.”
The rules
Superannuation members in a taxed super fund can, generally, make lump sum withdrawals passed the age of 60 tax-free.
However, if the member is younger than 65, they must satisfy one of the conditions of release.
According to the ATO website, common conditions of release are if the member reaches preservation age and, importantly, retires; has reached preservation age and begun a transition-to-retirement income stream; stopped employment on or after the age of 60; is 65 years old or has died.
Other special circumstances, such as the termination of gainful employment; permanent or temporary incapacity; severe financial hardship; compassionate grounds or a terminal medical condition could see the member eligible to withdraw at least part of their super benefits.
If you are withdrawing a lump sum from your superannuation before the age of 60, the sum will be taxed at 22 per cent (including Medicare Levy) or your marginal tax rate, whichever is less.
Self managed super fund
Critical tax considerations for SMSFs building new homes
The ATO has outlined some important considerations with GST for SMSFs thinking about building a new residential home. ...Read more
Self managed super fund
How much money do you need to set up a self-managed super fund?
How much money do you need to set up a self-managed super fund? Let’s see how much starting balance you should have to make your SMSF a cost-effective and viable retirement option. ...Read more
Self managed super fund
ATO flags SMSF compliance crackdown
SMSFs with outstanding compliance issues should consider making a voluntary disclosure while the ATO still has a more flexible approach in place and before they implement tougher admin penalties, a la...Read more
Self managed super fund
When can SMSFs invest in derivatives?
Do derivatives provide legitimate opportunities for SMSFs? A lawyer has weighed in. ...Read more
Self managed super fund
How much money do you need to set up a self-managed super fund?
How much money do you need to set up a self-managed super fund? Let’s see how much starting balance you should have to make your SMSF a cost-effective and viable retirement option. ...Read more
Self managed super fund
What is a self-managed super fund?
What is a self-managed super fund? Let’s get down to the basics and learn what an SMSF is and how it works. ...Read more
Self managed super fund
5 SMSF traps to beware before buying off the plan
Want to use your SMSF to purchase an off-the-plan property? Beware some of the more fickly rules and requirements. ...Read more
Self managed super fund
Are managed funds a lucky dip for SMSFs?
Over half of the most popular managed funds owned by SMSF members have underperformed benchmarks over the past five years, despite charging investors higher investment fees for this inferior performan...Read more
Self managed super fund
Critical tax considerations for SMSFs building new homes
The ATO has outlined some important considerations with GST for SMSFs thinking about building a new residential home. ...Read more
Self managed super fund
How much money do you need to set up a self-managed super fund?
How much money do you need to set up a self-managed super fund? Let’s see how much starting balance you should have to make your SMSF a cost-effective and viable retirement option. ...Read more
Self managed super fund
ATO flags SMSF compliance crackdown
SMSFs with outstanding compliance issues should consider making a voluntary disclosure while the ATO still has a more flexible approach in place and before they implement tougher admin penalties, a la...Read more
Self managed super fund
When can SMSFs invest in derivatives?
Do derivatives provide legitimate opportunities for SMSFs? A lawyer has weighed in. ...Read more
Self managed super fund
How much money do you need to set up a self-managed super fund?
How much money do you need to set up a self-managed super fund? Let’s see how much starting balance you should have to make your SMSF a cost-effective and viable retirement option. ...Read more
Self managed super fund
What is a self-managed super fund?
What is a self-managed super fund? Let’s get down to the basics and learn what an SMSF is and how it works. ...Read more
Self managed super fund
5 SMSF traps to beware before buying off the plan
Want to use your SMSF to purchase an off-the-plan property? Beware some of the more fickly rules and requirements. ...Read more
Self managed super fund
Are managed funds a lucky dip for SMSFs?
Over half of the most popular managed funds owned by SMSF members have underperformed benchmarks over the past five years, despite charging investors higher investment fees for this inferior performan...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
