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Signorina Algeri

May 05, 2023

Withdraw Funds

in SMSF Technical Forum

I have a client who has asked me this question:

- Lynette can’t work as she has a permanent disability and in the past has withdrawn amounts from her superfund.

If she was to make a contribution in 2022/2023 to reduce a capital gain in her personal name can she then withdraw the amount due to her permanent disability

4 comments

Comments (4)

THE AUDITORS INSTITUTE

May 08, 2023

Hi Signorina

I assume the member can receive the taxable member contribution (eg is under age 67).

In relation to permanent incapacity it is defined in SIS regulation 1.03C as:

"For subsection 10(1) of the Act, a member of a superannuation fund or an approved deposit fund is taken to be suffering permanent incapacity if a trustee of the fund is reasonably satisfied that the member's ill-health (whether physical or mental) makes it unlikely that the member will engage in gainful employment for which the member is reasonably qualified by education, training or experience."

The ATO states at:

www.ato.gov.au

Conditions of release

What are the conditions of release a member must satisfy to receive self-managed super fund (SMSF) benefits.

"Permanent incapacity

A member's benefits may be released if they cease gainful employment and you're satisfied that the member is unlikely, because of ill health, to engage in gainful employment that they are reasonably qualified for by education, training or experience. There are no cashing restrictions on payment of benefits."

If the permanent incapicty condition is met then yes the member can access their superannuation as the condition has nil a cashing restriction as per Schedule 1 of SIS. The condition is that the "trustee of the fund is reasonably satisfied that the member's ill-health (whether physical or mental) makes it unlikely that the member will engage in gainful employment for which the member is reasonably qualified by education, training or experience".

Thanks

SMSF AAA

THE AUDITORS INSTITUTE

May 08, 2023

Replying to

Hi Signorina

Yes if she meets the condition of the permanent incapacity definition then her benefits can be paid out. That is her superannuation can be paid to her if she is unlikely to ever again "engage in gainful employment for which the member is reasonably qualified by education, training or experience".

I note that the benefit is taxed as a lump sum as she is under age 60. There are special tax rules to increase the tax free component based on her age.

Thanks

SMSF AAA