Question 1 – Ensure a member has considered the advantages and disadvantages of rolling their superannuation out of an APRA-regulated fund?

Question 1 – Ensure a member has considered the advantages and disadvantages of rolling their superannuation out of an APRA-regulated fund?

Topic Progress:

Superannuation entitlements in a fund will generally cease once a member rolls over their entire balance to an SMSF. Members need to consider all the advantages and disadvantages of transferring their superannuation out of an APRA-regulated fund. Some points to consider include:

 
  • Fees – members need to check the exit or withdrawal fee that the fund will charge (if any). These fees could include administration fees, exit or withdrawal fees.
  • Death and disability benefits – members will generally lose any insurance entitlements in the exiting fund if they transfer their whole entitlement out of the fund. They may not be able to obtain insurance, may need to take a medical exam or their insurance cost may be higher if they transfer out of the fund.

Treatment of rollover – tax consequences and the preservation rules

No tax is generally payable on superannuation rolled over or transferred from one superannuation fund to another. The preservation components of a rolled over benefit is maintained in the new fund, which means that the rolled over benefit can only be accessed once a member has met a condition of release.

WARNING – Penalty tax on early access to superannuation

It is important that members only access their superannuation when they are entitled to. Any superannuation accessed early is included in assessable income and taxed at a member’s normal marginal tax rates. The ATO can impose additional penalties and disqualify the member from being trustee of the SMSF.