What should I Consider before Withdrawing my Super

Before withdrawing the benefit there are many advantages and disadvantages in the manner in which a super benefit is paid.

Compulsory cashing – But before these are broadly outlined it is worth noting first that the trustee must cash (pay) a members benefits as soon as practicable after the person dies. Accordingly retirement/estate planning is a good idea given the time restrictions once a member becomes deceased.

Strategies – Issues to consider that could give rise to advantages and disadvantages can be determined by reviewing the Super Strategies such (1) withdrawing a Lump Sum or (2) Withdrawing as a Pension or (3) withdrawing as a Lump Sum up to the tax free amount and re-contribution before commencement of a pension to boost the tax free component, etc. In particular the Super Plan for 60+> and the <super plan for less than 60> can provide great insights into ways to maximise your withdrawal lump sums and pensions. 

Allocating Costs – Prior to paying member benefits, the trustee must allocate costs in a fair and reasonable manner. 

Determine taxable and tax free components – The trustee needs to calculate the taxable and tax free components see superannuation tax table, so that when a lump sum payment is made, the <proportionate rule> is applied to proportionately pay a taxable and tax free component. Remember the taxable component may result in a tax liability depending on the circumstances, eg the beneficiary’s age, a tax dependant, etc. 

Also ensure that if SMSF’s Trustee’s don’t record market values of assets in the Financial Reports of a SMSF then the taxable component immediately before withdrawal could be much higher than expected as the growth (unrealized gain) in an accumulation interest needs to be reflected in the taxable component prior to withdrawal of member benefits. Further any unidentified components will be treated as taxable components therefore good Trustee record keeping is required. 

Here’s what the ATO says about the key factors that affect how your super payout is taxed  <ATO-Link>.