Care required in paying super benefits

November 2, 2023 | Luke Wade

Generally, before SMSF trustees pay a member’s super benefits, they need to ensure that:

Benefit payments to members who have not met a condition of release are not treated as super benefits.  Instead, they will be taxed as ordinary income at the member’s marginal tax rate.

If a benefit is unlawfully released, the ATO may apply significant penalties to:

The ATO may also disqualify the trustee(s) involved.

Investment restrictions and other rules that apply to SMSFs in the accumulation phase continue to apply when members begin receiving a pension from the SMSF.

Where a member has met a condition of release, the trustee can either pay the benefit as a lump sum or super income stream (i.e., a pension).  If a member has died, the trustee will generally pay a death benefit to a dependant or other beneficiary of the deceased, subject to the applicable rules.