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When you retire, your DIY Super fund can pay you a Lump sum or a Pension. A lump sum is more flexible than a Pension benefit. The beneficiary can choose to use the money to purchase an immediate annuity, repay existing debts, invest the entire balance or spend the money on consumer items.
Many recipients of lump sums are not accustomed to investing money. Therefore they often lack the necessary skills to invest the funds and may often make poor or uninformed investment decisions.
If you choose the Pension path from your DIY Super Fund, the member has to continue investing money to draw an Income stream from the Super Fund.
You can also start a Pension benefit with the view & option to commute (finish – break) the Pension benefit and take out the balance as a lump sum. A lump sum payment or a pension benefit (both) may run out if a member lives for a long time or if there is not enough money at retirement or if the investment return is lower than Pension withdrawal.
Opting for Pension path minimises the possibility of a member double dipping, i.e. spending their lump sum quickly or commuting their pension and then relying on the old age pension for support
Generally members with high Fund balances choose the Pension path due to tax relief (15% rebates up to the persons RBL – see limits below ) from Pension benefits – Income Streams, these retirees prefer a self funded retirement instead of relying on government old age pension for support. Further, due to their high assets in and outside of Super are anyway not eligible for Government age old pension.
The circumstances where trustees may pay a cash benefit to a member refers to the 'conditions of release' and are as follows:
It should be remembered the trust deed must allow for the benefit to be paid in the circumstances listed above.
When you retire at your retirement age, your super fund can pay you the whole amount as a lump sum.
The following table shows how Lump Sum Withdrawals will be treated for 2005 Financial Year.
| Component | Tax Treatment |
| Undeducted | Tax Free |
| Concessional | 5% at Marginal Tax Rate + medicare levy |
| Pre '83 Component | 5% at Marginal Tax Rate + medicare levy |
| Post '83 (taxed) Component | Under 55 Years at the time of withdrawal 20% + medicare levy |
| 55 year & Over at the time of withdrawal First $123,808 can be taken out tax free. Over $123,808 Maximum tax rate 15% (plus medicare levy) |
|
| Post '83 (untaxed) Component |
55 Year & Over at the time of withdrawal First $123,808 Maximum tax rate 15%(plus medicare levy). Over $123,808 Maximum tax rate 30% (plus medicare levy) |
| Excessive | Taxed at 47% + medicare |
| Post June '94 Invalidity | Tax Free |
| CGT Exempt | Tax Free (except if over relevant RBL) |
The ETP Threshold for the previous years as follows:-
| Year | Threshold |
| 2006 | TBA |
| 2005 | 123,808 |
| 2004 | 117,576 |
Since 1 July 1995, the $400,000 lump sum limit is indexed each year in accordance with movements in the average weekly ordinary time earnings
The pension RBL will be applied to the payment of a benefit where at least 50% of the benefit plus any benefits taken previously are taken in the form of a pension or annuity.
RBL of previous years are as follows :-
| Year | Lump Sum RBL | Pension RBL |
| 2006 | TBA | TBA |
| 2005 | 619,223 | 1,238,440 |
| 2004 | 588,056 | 1,176,106 |
In case of your death any money in your super fund will be paid out by the trustees as per the trust deed and with regard to your nominations
| Paid to Dependant | Tax Treatment |
| Up to Deceased's Pension RBL | Nil |
| Above Deceased's Pension RBL | Tax at 47% + medicare |
| Paid to Non Dependant | Tax Treatment |
| Up to Deceased's Pension RBL | |
| Undeducted | Nil |
| Pre '83 | 5% at Marginal Tax Rate |
| Post '83 (Taxed) | 15% + medicare levy |
| Post '83 (Untaxed) | 30% + medicare levy |
| Above Deceased's Pension RBL | Tax at 47% + medicare levy |
A dependant for tax purposes includes a spouse and children aged under 18 years. For SIS purposes dependant includes children of any age. Some special rules apply for interdependence for same sex couples
*Financial hardship
Applications must be made to the trustee of the fund holding the superannuation money. Generally the applicant must show that they have received welfare benefits (Centrelink unemployment or Newstart benefits) for a fixed period and that they are unable to meet their day-to-day living expenses.
Superannuation monies will only be released to cover a person's everyday living expenses and the release is limited to one payout of no more than $10,000 during a 12 month period.
**Compassionate grounds
Applications must be made to the Australian Prudential Regulation Authority. Superannuation monies can be released to pay for medical treatment and associated transport requirements, home or motor vehicle modifications to cater for those with severe disabilities, palliative or associated expenses or for the purpose of making mortgage repayments, where foreclosure is threatened by the mortgagor.
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