To ensure that the pension standards for self-managed super funds (SMSFs) are met, it is important that you, as fund trustee, consider the time that a member’s benefit is cashed (that is, ‘paid’). As a general rule, a benefit is cashed when the member receives an amount and the member’s benefits in the SMSF are reduced.
Ruling TR 2010/1 outlines our view on how and when a contribution is made. This view is equally relevant when considering how and when a benefit payment is made from a SMSF.
See also:
The table below summarises the ways in which benefits are typically paid to a member from an SMSF and when we consider the pension payment to have been made.
Way funds are transferred to member |
When pension payment is considered made |
|---|---|
Cash payment (either in Australian or foreign currency) to the member |
When the member receives the cash. |
Electronic transfer of funds to the member |
When the funds are credited to the member’s account. |
By money order or bank cheque |
When the member receives the money order or bank cheque (unless the order or cheque is dishonoured). |
By cheque (other than one that is post-dated) that is presented and honoured with cash or its electronic equivalent |
When the member receives the cheque (as long as it is presented promptly and is honoured). |
By post-dated cheque that is presented and honoured with cash or its electronic equivalent |
When the cheque can be presented for payment (that is, the date on the cheque), as long as it is presented promptly and is honoured. |
By transfer of an asset to the member under a partial commutation |
When the member obtains beneficial ownership of the asset from the SMSF trustee. |
Benefits cannot be cashed with a cheque that is not honoured with an actual payment of money or transfer of benefits from the fund.
Example: Electronic funds transfer on 30 June
The payment of a benefit using an electronic funds transfer is made when an amount is received by the member.
Where the trustee of a SMSF arranges an electronic funds transfer for the minimum annual pension payment on 30 June and it is processed overnight or later, the pension payment will be treated as made on or after 1 July of the following income year. The pension standards may not be satisfied in the relevant year.
Where there is a simultaneous debit and credit of the SMSF’s and member's accounts linked at the same institution and the funds are available immediately for use by the member, the pension payment is made on 30 June. Evidence such as a computer print-out recording the receipt of the amount into the member’s account may be used to establish the timing of the payment.
End of exampleIf the financial year end falls on a weekend or public holiday, trustees are expected to ensure that all pension payments are made prior to 30 June.
See also:
A summary of the ways in which an SMSF typically pay benefits to a member.