COMPLIANCE
Getting at the money
Many legislative and regulatory restrictions apply when SMSF members want to draw down their retirement savings. Tim Miller looks at the different avenues of access and the rules relevant to them.
TIM MILLER is education and technical manager at Smarter SMSF.
The payment of benefits from an SMSF represents one of the most important and closely regulated aspects of superannuation law. Trustees are entrusted with ensuring member entitlements are only released in accordance with legislated conditions of release and the form, timing and taxation treatment of those benefits comply with the Superannuation Industry (Supervision) (SIS) Act 1993, the associated regulations and relevant tax law. For members, receiving benefits is often the culmination of decades of contributions and investment growth. For trustees, it is the moment where regulatory discipline is most visible as breaches of benefit payment standards can result in severe penalties, disqualification and adverse tax outcomes. This article explores the framework for paying benefits from an SMSF, combining legislative rules, taxation implications and practical trustee considerations. Preservation and conditions of release All contributions and investment earnings in superannuation are preserved until a condition of release is satisfied. This reflects the sole purpose test that dictates superannuation is designed to provide retirement income, not serve as an early-access savings vehicle. Preservation age A member’s preservation age depends on their date of birth, phasing from 55 for those born before 1 July 1960 to 60 for those born after 30 June 1964. Attaining preservation age alone does not provide full access to
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superannuation, it merely allows limited access through a transition-to-retirement income stream (TRIS) until a further condition is met. Key conditions of release The most common conditions of release include: • Retirement – with definitions depending on whether the member ceased being gainfully employed before or after they turned 60. If prior to 60, the trustee must be satisfied the member intends never to be gainfully employed again for more than 10 hours a week. If over 60, ceasing a gainful employment arrangement is sufficient, without reference to future intent. • Turning 65 – provides automatic access to benefits regardless of work status. • Permanent incapacity – where trustees are reasonably satisfied the member is unlikely to engage in gainful employment for which they are qualified due to ill health. • Terminal medical condition – certified by two medical practitioners (one a specialist) where ill health is likely to result in death within 24 months. • Death – where benefits must be paid as soon as practicable to dependants or the legal personal representative. Example — retirement after 60 Mary turned 60 in June 2025. If she ceases her Continued on next page
