Once an SMSF member meets a condition of release, they can take their super as a lump sum, a pension, or a combination. Moving a balance to another fund means a rollover, now exclusively through SuperStream. SMSFcentral handles the documentation, tax component calculations, and electronic processing for every benefit payment and rollover out. The rules are strict and the consequences for getting them wrong are severe. Paying a benefit to someone who has not met a condition of release is illegal early access, one of the most serious contraventions under the SIS Act.
What’s Included
Our benefit payment and rollover service covers:
- Condition of release verification. We confirm the member has met a valid condition before any payment is made.
- Tax component calculations. Each payment is split into tax-free and taxable components for correct taxation.
- Lump sum benefit payments. Cash payments are processed with PAYG withholding where applicable.
- Death benefit processing. We calculate entitlements, confirm nomination validity, and pay benefits to dependants or the estate.
- Binding death benefit nomination (BDBN) management. Preparation, renewal tracking (every 3 years for non-lapsing deeds), and validity checks.
- Electronic rollovers to APRA funds, other SMSFs, or KiwiSaver schemes via SuperStream.
- PAYG payment summaries. Member payment summaries issued for lump sums and pensions.
- For First Home Super Saver Scheme (FHSS) releases, we process ATO determination letters and release the correct amount.
Our Process
- Confirm the condition of release. We verify the member has met a valid condition under Schedule 1 of the SIS Regulations. This includes reviewing evidence such as a retirement declaration (for members over preservation age), a terminal illness certification from two registered medical practitioners, or an ATO determination for FHSS.
- Determine the payment type. We confirm whether the member wants a lump sum, a pension, or a rollover to another fund. For death benefits, we check the trust deed and any binding or non-binding nomination to determine who receives the benefit and in what form.
- Calculate tax components. Every super benefit has a tax-free component and a taxable component. The tax-free component is made up of contributions segment (non-concessional contributions) and the crystallised segment. We calculate the proportions based on the member’s account at the time of payment. These proportions determine the tax treatment.
- Prepare documentation. We draft the trustee minutes authorising the payment, the member’s written request (or death certificate and nomination for death benefits), and any required ATO forms. For rollovers, we prepare the rollover benefits statement.
- Process the payment or rollover. Lump sums are paid directly to the member’s nominated bank account after deducting any PAYG withholding. Rollovers are processed electronically via SuperStream: the SMSF sends both the money and the data message to the receiving fund. Since 1 October 2021, all SMSF rollovers must use SuperStream.
- Withhold and report tax. For lump sum payments to members under 60, we calculate and withhold PAYG tax. Benefits paid to members aged 60 and over are generally tax-free. Death benefits paid to non-dependants (for tax purposes) are taxed on the taxable component. We lodge the required reporting with the ATO.
- Issue payment summaries and update records. We provide the member (or beneficiary) with a PAYG payment summary, update the fund’s member register, and adjust account balances in the financial statements.
Regulatory Context
Conditions of Release
Schedule 1 of the SIS Regulations sets out the conditions a member must meet before accessing their super. The main conditions are:
- Retirement: ceased employment after reaching preservation age (currently 60 for anyone born after 30 June 1964)
- Reaching age 65: unrestricted access regardless of employment status
- Death: benefits paid to dependants, nominated beneficiaries, or the estate
- Terminal medical condition: two registered medical practitioners certify the member is likely to die within 24 months
- Permanent incapacity: unlikely to ever work in a role they are qualified for
- Temporary incapacity: income protection-style payments during a period of inability to work
- Severe financial hardship: must meet specific ATO criteria including receipt of government income support for at least 26 weeks
- Compassionate grounds: ATO approval for specific expenses (medical, disability modifications, funeral, mortgage default)
- FHSS: ATO issues a determination for release of eligible voluntary contributions up to $50,000
Taxation of Benefits
Section 307 of the Income Tax Assessment Act 1997 governs how super benefits are taxed.
Members aged 60 and over: Lump sums and pensions are tax-free, regardless of the tax components.
Members aged between preservation age and 59:
- Tax-free component: Not taxed
- Taxable component up to the low rate cap ($235,000 for 2023–24): Not taxed
- Taxable component above the low rate cap: Taxed at 15% plus Medicare levy
Members under preservation age:
- Tax-free component: Not taxed
- Taxable component: Taxed at 20% plus Medicare levy
Death benefits paid to non-dependants (for tax purposes):
- Tax-free component: Not taxed
- Taxable component, taxed element: 15% plus Medicare levy
- Taxable component, untaxed element: 30% plus Medicare levy
Death Benefit Nominations
The trust deed determines what types of nominations the fund allows:
- Binding death benefit nomination (BDBN): The trustee must pay the benefit to the nominated person(s) in the specified proportions. Standard BDBNs lapse after 3 years unless the deed allows non-lapsing binding nominations.
- Non-binding nomination: The trustee considers the member’s wishes but has discretion over who receives the benefit and in what form.
- Reversionary pension nomination: Made at the time a pension commences. The pension automatically continues to the reversionary beneficiary on the member’s death.
Common Pitfalls
Illegal early access. The member cops additional tax at the top marginal rate plus Medicare levy, and the trustee may be personally liable for penalties. In the worst case, the fund is made non-complying, triggering 45% tax on all assets. The ATO does not treat these cases lightly.
A standard BDBN expires 3 years after signing. If the member dies after it has lapsed, the trustee has discretion over who gets the death benefit, which may not be what the member wanted. We track BDBN expiry dates and send renewal reminders 90 days out.
The tax-free and taxable proportions are locked at the time of payment. Once the benefit is paid, you cannot go back and correct it. A wrong split means the member (or beneficiary) pays the wrong amount of tax, and unwinding it is a nightmare. The ATO expects accurate calculations based on the member’s records at payment date.
Since 1 October 2021, every SMSF rollover must go through SuperStream. Both the money and the data message are required. Sending a cheque or direct transfer without the SuperStream message is non-compliant. The receiving fund can reject it, and the ATO can issue penalties.
Frequently Asked Questions
Preservation age is 60 for anyone born after 30 June 1964. For members born before that date, preservation age ranges from 55 to 59 depending on their date of birth. Most current SMSF members now have a preservation age of 60.
Yes, but only to a dependant of the deceased member. Dependants for this purpose include the spouse, children under 18 (or under 25 if financially dependent), and any person in an interdependency relationship with the deceased. Non-dependants must receive their benefit as a lump sum.
The rolling-out fund must process the rollover within 3 business days of receiving a valid rollover request. The receiving APRA fund then has 3 business days to allocate the benefit to the member’s account. In practice, most rollovers between an SMSF and an APRA fund settle within 5 to 7 business days.
The FHSS allows members to withdraw eligible voluntary contributions (up to $15,000 per year, $50,000 total) to purchase their first home. The member applies to the ATO, which issues a determination specifying the release amount. The SMSF then pays that amount to the ATO, which passes it to the member. The released amount is taxed at the member’s marginal rate less a 30% offset.
No. A death benefit paid to a spouse (or other tax dependant) is tax-free regardless of the member’s age or the tax components. PAYG withholding is only required for death benefits paid to non-dependants for tax purposes, where the benefit includes a taxable component.
Related: SMSF Conditions of Release: When Can You Access Your Super? | Pension Management | Contributions Management | Day-to-Day Administration and Compliance
Ready to Pay a Benefit or Process a Rollover?
Call 02 8412 0086 or email [email protected]. We verify conditions of release, calculate tax components, and handle the SuperStream processing.
Periodic / recurring payments.
Lump sum payments.
Partial and full rollovers out.
Same Day payments (if requested prior to 12pm).
Arrangement of bank cheques where necessary.