Superannuation Funds Conditions of Release
Category : Practice Updates
To cash preserved benefits or restricted non-preserved benefits, a member must satisfy one of the conditions of release.
Unrestricted non-preserved benefits may be cashed at any time.
Some conditions of release restrict the form of the benefit (for example, lump sum or pension) or the amount of benefit that can be paid. These are known as ‘cashing restrictions’.
The most common conditions of release for paying benefits are that the member:
- has reached their preservation age and retires
- has reached their preservation age and begins a transition-to-retirement income stream
- ceases an employment arrangement on or after the age of 60
- is 65 years of age (even if they haven’t retired)
- has died.
In special circumstances at least part of a member’s super benefits can be released before the member has reached preservation age. These are:
- terminating gainful employment
- permanent incapacity
- temporary incapacity
- severe financial hardship
- compassionate grounds
- terminal medical condition
If you are trustee of an SMSF, you must ensure that the member has met a condition of release before you release any funds, and check that the governing rules of your fund allow it. It’s possible that a benefit may be payable under the super laws but not under the rules of your SMSF
Generally, rollovers to other super funds don’t require the member to satisfy a condition of release, subject to the governing rules of your SMSF.
Payments of benefits to members who have not met a condition of release are not treated as super benefits – instead, they will be taxed as ordinary income at the member’s marginal tax rate. Significant penalties may also apply to you as trustee and to your fund. See also:
Source: Australian Taxation Office