- What is the Lump Sum Benefit withdrawal
- How Much can I withdraw as a Lump Sum
- What is the Taxable & Tax Free Amounts, Tax Rates on Withdrawal
- SUPERANNUATION TAX TABLE
- Lump Sum Paper Work
- How do I pay myself the Lump Sum Benefit
What is the Lump Sum Benefit withdrawal
A Lump Sum Benefit Withdrawal is simply a payment from a SMSF in a lump sum, as opposed to a withdrawal paid out over a period of time, like a Pension.
How Much can I withdraw as a Lump Sum
A Trustee can payout the entire balance of the members account balance as a Lump Sum Benefit.
What is the Taxable & Tax Free Amounts, Tax Rates on Withdrawal
Tax is payable depending on the age of the member and the components (taxable and tax free portions) of the super being withdrawn.
Members 60years or greater
Generally where members have ceased employment the payment of a LUMP SUM or PENSION at the time the member is 60 is tax free, (ie non assessable non exempt). The payment of the LUMP SUM is tax free regardless of the tax free and taxable components of the lump sum payment, except if it includes a Taxable Component with an untaxed element (only arising from a lump sum death benefit that includes insurance proceeds) as shown in the table below
Members less than 60years
Where members have met a condition of release, eg retired, then the tax is applied whether it is drawn as a LUMP SUM, a PENSION or a Transition to Retirement Scheme (“TRIS”) as shown in the below Super Tax Table:
SUPERANNUATION TAX TABLE
| Tax Free Component & Taxable Component |
Lump Sum = L Tris / Pension = TP |
Age |
Tax Rate |
Tax Free Component – this comprises the following:
- All Post 1.7.07 contributions not assessable in the Super Fund (ie non concessional, undeducted contributions, spouse contributions); and
- existing components in the super fund as at 30.06.07 (s307-225) such as:
- pre july 83 component (1)
- CGT exempt component
- Concessional
- Post June 1994 invalidity component; and
- Concessional component
- Undeducted contributions
|
L
&
T&P
|
Any Age (Assuming condition of release has been met, ie under preservation age unpreserved unrestricted benefits) |
Nil |
Tax Free Component for a death benefit – comprises the following:
- Any UUPP (the amount of the UPP that has not been used to increase the tax free component of the deceased’s account; and
- any determined pre jul 83 component
|
Pre 30.07
AP
Pension
Death benefit
|
Any Age (Assuming condition of release has been met, ie under preservation age unpreserved unrestricted benefits) |
Nil |
| Taxable Component |
L
|
Under 55 |
21.5% |
| Taxable Component |
T&P
|
Under 55 |
Marginal rates(MR)
-15% rebate |
| Taxable component and up to the low rate cap currently $165,000 |
L
|
55-59 (over preservation age) |
Nil |
| Taxable component over the low rate cap currently $165,000 |
L
|
55-59 |
16.5% |
| Taxable component |
T&P
|
55-59 (over preservation age) |
MR -15% rebate |
| Taxable component |
T&P
|
60+ |
Tax Free |
| Taxable component – taxed element |
L
|
60-65 and retired or
65+ |
Nil |
| Taxable component – untaxed element (only arising from a LUMP SUM death benefit that includes insurance proceeds) |
L
|
60-65 and retired or
65+ |
Nil |
Notes:
- Pre July 83 component is the only component not set (determined at 30.6.07), however trustees were required to have calculated the pre component at 30.06.07. See Pension Strategy
- MR – means marginal income tax rate which presently ranges from 0% to 46.5% incl medicare, see rates table. – these tax rates/rebates and tax free status of pension payments apply only if the rules are satisfied.
A payment withdrawn from a pension cannot cheery pick between the components to take advantage of the tax free portion, this is because of the <Proportioning Rule>.
Lump Sum Paper Work
To withdraw your super as a Lump Sum you / the trustee first needs to determine the components of the super balance, preserved, taxable/non taxable, etc, the amount of the super account, and the strategies to withdraw, you then have the information you will need to complete the documentation to withdraw as a LUMP SUM or PENSION/TRIS or both as follows:
The following paper work is required:
- Obtain and review your trust Deed to ensure nothing prevents trustee/you paying a TRIS.
- prepare a letter from the member to the trustee requesting a lump sum pre payment statement
- The trustee complete a ATO pre payment statement- part A (not compulsory but best practice) which details the components of the super benefit and affords the member to seek advice re the treatment of the payment
- The member return ATO pre payment statement- Part B OR the member prepare a letter to the trustee stating how they want to be paid, for example whether it will be in cash, in specie or both
- A PAYG payment summary superannuation (lump sum), one copy to be given to the member with payment and the ATO copy lodged within 14 days of payment. Not required for persons 60 or more as no tax payable, unless from an untaxed source (to read more on untaxed source see <taxable component – untaxed source>
- If receiving part of the lump sum as property then a minute from the trustee detailing the asset and its value that is being vested to the member in specie.
- Prepare the accounting records – entries to reflect these payments making sure the appropriate components are changed in accordance with the proportionate rule. Often specialist SMSF software will do this for you.
Warning – remember any sale of assets by the SMSF to pay out a lump sum payments while in accumulation mode will trigger capital gains tax within the SMSF. An alternative is to convert to pension and then withdraw a lump sum.
How do I pay myself the Lump Sum Benefit
Next you need to transfer the assets. If your transferring property then you need to prepare and lodge the appropriate property transfer forms, perhaps engaging a settlement agent or conveyance lawyer will assist.
Write a cheque/EFT/etc the NET amount of the benefit, after<deducting any tax>, made payable to the member.
Write a cheque/EFT/etc to the ATO where tax is deducted on behalf of the member together with lodging the PAYG form.
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