The different rules applying to the draw down phases of superannuation are causing many self-managed super fund (SMSF) trustees to be confused as to how they can access their retirement savings within the law, according to Partners Superannuation Services director Martin Murden.
“In some circumstances it has resulted in superannuants drawing on their super prematurely or drawing more than they are legally entitled to,” he said.
The confusion arises from the fact there are different rules governing the access of superannuation depending on the age bracket the individual falls within.
Currently, people over the age of 55 can start a transition to retirement income stream that allows them to withdraw a maximum of 10 per cent of their superannuation balance each year.
In addition, individuals over the age of 60 can access their super with no restrictions, as long as they are retired, tax free.
Many SMSF trustees are not recognising these different rules and are withdrawing as much of their super as they please from the age of 55.
To further compound the situation, a number of SMSF trustees erroneously believe they can borrow funds from their super account.
“Wrong, wrong, wrong. Members cannot borrow from their superannuation fund. It is a breach of the legislation governing superannuation,” Murden said.
The consequences of breaching the superannuation access rules can be severe, he said.
“These can vary from individuals being taxed at marginal rates for the amount withdrawn from the fund, additional penalties on the SMSF itself and the embarrassment of being discredited as an SMSF trustee.”
