More than $630 million has been accessed illegally from SMSFs. Colin Lewis explains how to stay on the right side of the law.
Already a subscriber?The Australian Tax Office recently revealed that between 2020 and 2022 more than $630 million of super was illegally withdrawn by SMSF trustees, noting more funds appear to be at risk of breaching the access rules.
Take Tom, who is a beneficiary and employee of a discretionary trust which carries on a business. At age 59, he stops working for the trust and is paid out his entitlements. On turning 60 on July 15 the trustee of Tom’s SMSF is satisfied he intends never to work again and commences paying him an account-based pension.
If Tom's work increases business turnover resulting in larger trust distributions, there’s every chance the arrangement under which Tom was employed has not ended as he’s still receiving 'reward' for his efforts – just not as wages. Tom cannot access his preserved benefits – including the contribution from the investment property sale he made at 61 – as he’s left it too long, his circumstances have changed, and he doesn’t satisfy the retirement condition of release at this time.If you are aged 60 to 64, retirement for superannuation purposes occurs when you cease an employment arrangement, even if you intend to work again.
With an SMSF, you need to be extra diligent when assessing whether you’ve satisfied a condition of release as you have a vested interest in accessing your own benefits.Rani ceases working in the company – handing that role over to her son – and is paid out her full entitlements but it being her company, she remains a director.Although Rani is still a director, she has ceased being an employee and can access her super.
While this particular contract has ended, the arrangement under which he is gainfully employed has not – Bob is and remains a contractor. Thus, Bob does not satisfy the retirement condition of release and cannot commence an account-based pension. Liken this to an electrician who finishes a job for a customer but they’re still gainfully employed as a tradeperson.Now let's consider Ray and Sylvia , who run an Airbnb.
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