General / Aug 10, 2020

Take care with member withdrawals

Brent Jones
Share Share Share Share

by Alicia Thomson

There are many reasons a member may need to withdraw funds from their SMSF including funding insurance premiums, full member exits, fund wind-ups and the more recent phenomenon Covid-19 early release. 

It is extremely important that before withdrawing funds from an SMSF, the accounts are up to date to ensure the member balance and components are correct.  Where a member withdraws more than their member balance it can be extremely difficult to fix, especially if they are reluctant to make up the difference as a contribution or to initiate a transfer back from the receiving fund. 

Fixing member balance errors from withdrawals can be
time consuming and difficult.

To avoid this situation it is important to keep fund accounts up to date and to discourage withdrawals until all unmatched transactions are processed and missing documentation is provided. 

Where a member requests their full balance be rolled out or withdrawn before accounts are finalised, it is recommended that it be done in two stages – an initial payment and then a final amount once the accounts are completed.  The buffer to retain for the final payment will depend on the circumstances of each fund, but we would always recommend a conservative approach to avoid the complications of a negative member balance.

It is also important where member benefits are rolled over that you obtain confirmation from the receiving fund, as most auditors will want to see this evidence.  We have seen instances where rollovers have been incorrectly treated as non-concessional contributions by the receiving fund.

Over the next few weeks we will publish an article and handy checklist on the steps and considerations when winding up a SMSF.

Similar Posts

General / Tuesday, June 28th, 2016

SMSF year end review tips

The end of the financial year is a good time to review your, and your clients SMSF arrangements to ensure […]

Brent Jones
General / Monday, July 20th, 2020

ATO Targeting COVID-19 Relief Measures

by Alex Polorotoff The ATO has indicated it will be placing a greater focus on scrutinising documentation and investment strategies […]

Brent Jones