What are the rules?

A Self-Managed Superannuation Fund (SMSF) is a super fund managed by you and allows you to take control over the investment strategy of your fund. It also provides greater flexibility in terms of investing the fund’s assets, retirement income options and estate planning.

If you are above preservation age and meet a condition of release, you may be able to make a tax-free lump-sum withdrawal.

What is a lump sum?

What’s this term that’s cropping up all the time? A lump sum is a single payment accessed from your super account which is not a pension payment. In the event of no extenuating circumstances, you can make these withdrawals once turning 65 or retiring.

At what age can you withdraw money from your super or SMSF?

Super accounts are generally designed to fund your retirement. So, this means that it’s only possible to access funds once you have reached your ‘preservation age’ and when you’ve permanently retired. Reaching the age of 65 can also function as a withdrawal condition.

Your ‘preservation age’ is the earliest age you can be to access your super account, and it varies for each individual. It’s calculated based on your birth date.

Only through these conditions can you withdraw money from your SMSF or super without cash restrictions.

In which situation can you withdraw money early?

There are some grounds on which you can access your super or SMSF funds early. Granted, they are limited.

Financial hardship

You must have received government income support payments continuously over the course of 26 weeks and be struggling to pay for necessary family expenses to access SMSF or super funds early.

There are limits as to how much money you can access, with the minimum amount being $1,000 and the maximum being $10,000. This money is taxed as a super lump sum. Also, you can only make one withdrawal in a 12-month period.

To withdraw money on financial grounds, you must contact your super provider.

Temporary/permanent incapacity

Temporary incapacity means that you are currently unable to work, or are currently working fewer hours than usual because of physical or mental health conditions.

Money from your super or SMSF will be paid in regular instalments, known as an income stream until you are able to return to work properly.

Permanent incapacity works differently. It is recognised as a disability super benefit and can be received as a lump sum or as an income stream. You can receive the super as either a lump sum or as regular payments (income stream).

Medical grounds

If you have a terminal medical condition, you can withdraw money from your SMSF or super as a lump sum.

To do so, two registered practitioners must agree that you are suffering from a condition likely to result in death within 24 months of your application. One of these practitioners must specialise in your illness or a related field.

Other instances in which you can access super money early include:

  • Medical treatment or transport for you/someone under your care
  • Making a payment on a home loan or council rates
  • Expenses associated with the death, funeral or burial
  • If your super account is less than $200 and you change employers

How expensive is a super or SMSF?

There are many things you should consider before opting for an SMSF over other super accounts.

For your SMSF to be potentially cheaper to run than other super accounts, we generally recommend a starting balance of $500,000.

Speak to an SMSF advisor

Do you have questions regarding super fund withdrawals? For more information on super funds and SMSFs, contact Carbon today. We offer accountingtaxation and wealth management services across Australia, in SydneyMelbourneBrisbanePerth and Adelaide.

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