Paying benefits and returning contributions

For your self-managed super fund (SMSF) to receive concessional tax treatment, you must elect to be a regulated super fund. Your fund will continue to be a complying fund if you comply with the provisions and regulations of the SIS Act.

Super funds are concessionally taxed so that members will be encouraged to save for their retirement. To ensure that you are using your fund to save for your retirement, your SMSF is only able to pay amounts to or for you if you meet a condition of release. Generally, this is when you retire, begin a transition to retirement pension or turn 65 years of age.

Once you receive an amount from or on behalf of your member, you can only pay out an amount if:

• you are paying a benefit to or for the member because the member has met a condition of release
• you receive an amount which you cannot accept under the SIS Regulations and you need to pay all or part of the amount back to the contributor.

You need to know when you can pay benefits and what contributions you can and cannot accept. If you get it wrong, your fund can be made non-complying. This will generally mean that all of the assets and income of the fund will be taxed at the highest marginal rate (currently 45%) in the year the fund is made non-complying. Income in subsequent years will continue to be taxed at the highest rate whilst the fund remains non-complying.