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What are the tax implications of taking a lump sum from my SMSF?
This depends on a number of variables, namely: your age; work status and what your superannuation benefit consists of.
Firstly a condition of release must be met.
If you have retired and have met your Preservation Age then you are able to withdraw a lump sum.
If you are under 60 years of age the lump sum with be taxed as follows:
1. Taxable Component - taxed amount will have no tax withheld up to the low rate cap amount ($175,000 for the 2013 financial year). Any lump sum greater than this will be taxed at 16.5% including the Medicare levy. This balance usually consists of contributions and any earnings that have paid tax.
2. Taxable component - untaxed amount will be taxed at 16.5% including Medicare levy up to the low cap amount. A lump sum greater than this amount will be taxed at 31.5%. This component is usually made up of amounts that have never paid tax, i.e., public sector funds.
3. The Tax Free component is not assessable and not exempt income.
Concerning point no. 3 the tax free component must be paid in proportion to the taxable component. This proportion needs to be calculated prior to the lump sum being paid. Refer Section 307 - 125 (ITAA 1997).
Please note that Section 301 - 25 of the Income Tax Assessment Act 1997 (ITAA 1997) entitles you to a tax offset of 15% of the taxable component of the benefit.
If you are over 60 years of age and have retired the lump sum will essentially be tax free.