Responding to release authorities issued to SMSFs

What is a release authority

A release authority is a document given to a super fund to authorise the release of a member's superannuation.

You may receive a release authority if a member has requested to have some of their super released early from their self-managed super fund (SMSF) where the member has:

• excess concessional contributions
• excess non-concessional contributions
• excess non-concessional contributions tax
• Division 293 tax – due and payable
• Division 293 tax – deferred debt account
• requested release under the First home super saver (FHSS) scheme
• Division 296 tax – due and payable
• Division 296 tax – deferred debt account.

The ATO may also issue a default release authority if an individual does not pay their Division 296 tax due and payable debt within 84 days of the date of the notice of assessment.

When an SMSF receives a valid release authority, it is authorised to release the specified amount from the member’s super account based on the instructions of the specific release authority.

A contravention will occur if you release this money before your SMSF receives a release authority.

Depending on the type of release authority, this amount is either paid:

• to the ATO
• directly to the member.

The release authority includes a release authority statement and instructions for completing it. As trustee, you must provide this information to us to confirm that you have released the member's money in accordance with the release authority.

Penalties for not meeting release authority obligations

You may incur a non-compliance penalty up to a maximum of 20 penalty units if you do any of the following:

• do not pay the required amount to us by the due date
• do not return the release authority statement (RAS) to us by the due date
• release an amount that is not the lower amount of either the
  • amount stated in the release authority
  • maximum available release amounts for the super interest held by the super fund.

Notification of a release authority

How you receive release authorities will depend on whether your SMSF has an electronic service address (ESA).

If your SMSF:

• has an ESA, we will send the release authority to your ESA and your fund will receive a notification either from your SMSF messaging provider or your fund administrator
• does not have an ESA, we will send a release authority letter and a release authority statement form, which as trustee you will need to complete.

The due date of the release authority will depend on the type of release authority.

Responding to a release authority

Before responding to a release authority, see Tax treatment of release authorities.

Before making the payment, if you are responding via SuperStream we recommend that you:

• lodge your release authority statement (RAS)
• confirm you get a successful RAS outcome response (RASOR).

If you do not receive the release authority or a successful RASOR, contact your SMSF messaging provider or fund administrator.

Step 1: Send us the release authority statement

How you respond to a release authority will depend on how we issued it to you. If the release authority was issued:

• to your ESA, you must send us the release authority statement (RAS) through your software, SMSF messaging provider or fund administrator
• by paper, you must action the release authority and return the paper RAS to us.

Your RAS should advise:

• the amount to be released to us
• for partial releases, whether any super benefits remain in the account
• where the amount released is less than the amount specified in the authority, why the full amount could not be released.

After you action a release authority and send a RAS using your software, you will either be:

• provided with a payment reference number (PRN) by your software, SMSF administrator or messaging provider
• advised to generate your own PRN.

You will need to include this PRN when paying the release amount. Make sure it matches the one provided in the data message.

If you received a paper release authority, your PRN will be included in the 'Pay now' section of the form.

If you are unable to action the release authority, send us either:

• a release authority error message through your ESA
• the completed paper RAS.

Step 2: Make the payment

You will need to electronically pay the lesser of either the:

• amount stated in the release authority
• total amount of the super that could be paid at that time.

The release authority you receive will include the bank account you need to make the payment into.

Remember to include the PRN when making the payment. The PRN in the RAS and the payment must be identical (both case and space sensitive). If they are not identical, we cannot allocate the payment.

If you are using an online banking channel or app to make your payment, you must only input the PRN that was provided or generated by you. This is how we match the payment to your reported RAS.

If the total amount to be paid for the RAS exceeds the payment limit in your banking app, contact your bank.

If you receive multiple release authorities, do not send one bulk payment. The amount you advise is being paid in the RAS must match the amount paid and the corresponding PRN.

Types of release authorities

There are several types of release authorities that you or your fund might receive, including:

• Excess concessional contributions
• Excess non-concessional contributions
• Excess non-concessional contributions tax
• Division 293 tax – due and payable
• Division 293 tax – deferred debt
• First home super saver scheme
• Division 296 tax – due and payable
• Division 296 tax – deferred debt.

Excess concessional contributions

Your SMSF will receive an excess concessional contributions release authority when a member both:

• exceeds their concessional contributions cap in 2013–14 and later financial years
• elects to release up to 85% of the excess concessional contributions.

The full amount of excess contributions will be included in your member's assessable income. It will be assessed at the individual's marginal rate of tax and a 15% tax offset will be applied.

Amounts of excess concessional contributions that are not released will be treated as non-concessional contributions.

The released amount must be paid directly to us and is to be treated as a non-assessable, non-exempt benefit payment to your member.

When your fund releases an amount to us, we will:

• offset the balance against any outstanding tax or other Australian Government debts
• pay the remaining amount to your member.

Excess non-concessional contributions

Your SMSF will receive an excess non-concessional contributions release authority when a member exceeds their non-concessional contributions cap and has either:

• elected to release the excess non-concessional contributions and 85% of associated earnings from that fund
• not made such an election after 60 days and we initiate the process on their behalf.

The released amount must be paid directly to us and is to be treated as a non-assessable, non-exempt benefit payment to your member.

When your fund releases the amount to us, it will be offset against any outstanding tax or other Australian Government debts before any remaining balance is refunded to your member.

You don’t need to amend the contributions report you provided for this member in your SMSF annual return for 2017–18 and earlier financial years. Releasing this benefit does not change the contributions that led to the excess.

Excess non-concessional contributions tax

Your SMSF will receive this release authority if your member elects to have their excess non-concessional contributions assessed as excess non-concessional contributions tax to pay their tax liability.

When your fund releases an amount to us, we will:

• offset the balance against any outstanding tax or other Australian Government debts
• pay the remaining amount to your member.

Division 293 tax – due and payable

When an individual has a Division 293 tax due and payable debt associated with contributions made to accumulation super accounts, the debt must be paid within 21 days of the date of the notice of assessment.

The individual can elect to release an amount from their fund within 60 days of the issue date to pay the debt. We will issue a release authority to their nominated fund. If your SMSF receives a release authority, you must pay us directly.

When your fund releases an amount to us, we:

• offset the balance against any outstanding tax or other Australian Government debts
• pay the remaining amount to the member.

Division 293 tax – deferred debt

When an individual has a Division 293 tax deferred debt that relates to contributions made to a defined benefit account, the debt is deferred until they take their end benefit from their defined benefit account. It can be pre-paid by the individual before that time by either:

• paying out-of-pocket
• electing to release money from another of their super funds (if done by the election due date).

If you elect to release money from your SMSF, when your fund releases an amount to us we will allocate the amount to your deferred debt account held by us.

First home super saver scheme

Your SMSF will receive a First home super saver (FHSS) scheme release authority when one of your members successfully requests us to issue one under the scheme.

The amount released by your fund must be paid directly to us.

When your fund releases an amount to us, we:

• withhold the appropriate amount of tax
• may offset the balance against any outstanding tax or other Australian Government debts
• pay any remaining amount to your member.

Division 296 tax – due and payable

When an individual has a Division 296 tax due and payable debt, it must be paid within 84 days from the date of the notice of assessment.

The individual can elect to release an amount from their fund within 60 days of the issue date to pay the debt. They can generally choose which fund they would like to have super released from.

If your SMSF receives a release authority, you must pay us directly.

When your fund releases an amount to us, we:

• offset the balance against any outstanding tax or other Australian Government debts
• pay any remaining amount to the member.

Division 296 tax – deferred debt

When an individual has a Division 296 tax debt that relates to relevant super earnings from their defined benefit account, the debt is deferred until they take their end benefit from their defined benefit account. It can be pre-paid by the individual before that time by either:

• paying out-of-pocket
• electing to release money from another of their super funds (if done by the election due date).

If you elect to release money from your SMSF, when the fund releases an amount to us we will allocate the amount to your deferred debt account held by us.

Tax treatment of release authorities

The payment of a release authority is a super benefit. The amount paid is to be treated as a non-assessable, non-exempt benefit payment to your member.

Your SMSF is not required to work out any tax-free or taxable components when the benefit is paid.

The cashing order for benefits paid to meet a release authority is:

1. Unrestricted non-preserved benefits.
2. Restricted non-preserved benefits.
3. Preserved benefits.

For more information about these types of benefits, see Paying SMSF benefits.