Paying Benefits from a Self Managed Super Fund

Paying Benefits from a Self Managed Super Fund

As reported on the ATO Website 7/5/2013
Commissioner’s foreword

At some stage your self-managed super fund will have one or more members enter the retirement phase. It also means you need to be aware of the additional responsibilities you have when you start paying retirement benefits to members of your own fund.

The strict rules governing self-managed super funds continue as you move out of the accumulation phase and move into paying benefits to your members.

You can pay retirement benefits in a number of ways. Whichever way you pay from your fund, you must ensure the relevant payment rules and regulations are being met. You are still responsible for the continued operation of the fund even if you use a tax, financial or superannuation adviser to help you manage it.

This publication is designed to help you meet your responsibilities in the retirement phase.

Chris Jordan

Commissioner of Taxation
Self-managed super and you

Like other super funds, SMSFs are a way of saving for your retirement. Generally, the main difference between an SMSF and other types of funds is that members of an SMSF are the trustees. This means the members of the SMSF run it for their own benefit.

SMSFs are not suitable for everyone and you should think carefully before deciding to set one up. It is a major financial decision and you need to have the time and skills to do it. There may be other, better options for your super savings. If you are considering an SMSF for your super savings, the publication Thinking about self-managed super (NAT 72579) provides you with some practical information. Licensed financial advisers, tax agents and accountants can also help you understand what is involved.

If you decide that an SMSF is the appropriate vehicle for your super savings, you need to ensure the fund is set up and maintained correctly so that it is eligible for tax concessions, can pay benefits and is as easy as possible to administer. Setting up a self-managed super fund (NAT 71923) provides some basic information on this and the steps you need to follow to set up the fund correctly.

Once your SMSF audit is established, you as trustee control the investment of the contributions and fund earnings. Your SMSF must have a trust deed that forms part of the governing rules for operating the fund. You must also prepare and implement an investment strategy and ensure it is reviewed regularly. There are rules and regulations you must follow to ensure the fund’s assets are protected to provide benefits in retirement.

While contributions are being made to the fund it is considered to be in the accumulation phase. The publication Running a self-managed super fund (NAT 11032) explains the responsibilities and obligations of trustees operating an SMSF.

When one or more members retire, you as trustee need to understand and follow the requirements of the law and regulations governing the payment of benefits. This publication is designed to assist trustees who are required to make payments out of their SMSF. It is important to note the rules and regulations that apply to funds in the accumulation phase continue even when one or more members retire; however, additional rules apply to the retirement phase.

You should continually reassess the circumstances of the fund and each individual member to determine whether an SMSF is still the most appropriate option for your retirement savings. In some cases you may find that you no longer have the capacity to deal with the complexity or the time required to manage your SMSF.

You may decide that it is not cost-effective to continue to run your own fund. Depending on the circumstances it may be necessary to transfer member benefits to another complying super fund.

Other reasons why you might wind up your SMSF include when all members have left the SMSF (for example, they have rolled over their benefits to another fund or have died) or all the benefits have been paid out. Winding up a self-managed super fund (NAT 8107) details the process you need to follow to wind up your fund.

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