Generally before you pay a member's super benefits, you need to ensure the:
- member has reached their preservation age
- member has met one of the conditions of release
- governing rules of your fund allow it.
Benefit payments to members who have not met a condition of release are not treated as super benefits. Instead, they will be taxed as ordinary income at the member's marginal tax rate. This is also known as illegal early release of super.
If a benefit is unlawfully released, we may apply significant penalties to:
- your SMSF
- the recipient of the early release.
In addition we may disqualify the trustees involved. This is published in the Federal Register of LegislationExternal Link as a notifiable instrument.
Operating standards, investment restrictions and other rules and regulations that apply to SMSFs in the accumulation or growth phase, continue to apply when members begin receiving a pension from the SMSF.
Where your member has met a condition of release, you can either pay the benefit as a lump sum or super income stream.
If a member has died, you will generally pay a death benefit to their dependant or other beneficiary of the deceased. There are additional rules to consider.
You should also consider if the income stream is an innovative retirement income stream which covers a range of lifetime products.Work out if you can pay a super benefit to a member and the types of benefits that exist.