• Paying a lump sum benefit

    Scenario

    Rose is 59 and has retired. She wants to withdraw $400,000 from her SMSF as a lump sum benefit. Rose’s total super interest in the fund is $500,000 made up of:

    • $40,000 personal contributions for which she did not claim a tax deduction
    • $300,000 employer contributions (that were taxed in the fund)
    • $160,000 crystallised segment (all super fund trustees had to calculate the crystallised amount by 30 June 2008 as it applied to super held at 30 June 2007).

    Work it out

    Before the payment can be made, the tax-free and taxable components need to be worked out. In this case the components are:

    • $200,000 tax-free ($160,000 crystallised segment plus $40,000 personal contributions)
    • $300,000 taxable ($500,000 total super interest minus $200,000 tax-free component).

    The benefit is paid from the tax-free and taxable components in the same proportions as they are represented in the total super interest. The tax-free and taxable proportions are:

    • 40% tax-free ($200,000 tax-free component / $500,000 total super interest)
    • 60% taxable (100% - 40%).

    Result

    Rose can be paid a $400,000 lump sum benefit that will consist of:

    • $160,000 tax-free component (40% of $400,000)
    • $240,000 taxable component (60% of $400,000).

    Although Rose has met a condition of release, if she takes a lump sum before she is 60, she may have to pay some tax on the taxable component. Because her employer contributions were taxed in the fund there will be no tax payable on the lump sum if she receives it after she turns 60. Rose decides to wait until then.

    See also:

    Calculating components of a super benefit

    Conditions of release

    Super lump sum tax table

    Super income stream tax tables

    Preservation age

      Last modified: 27 Nov 2015QC 47412