Understanding how SMSF member balances work
A lot of clients find the concept of member balances to be confusing as the calculations are not intuitive and cannot be easily shifted between members short of divorce, death and other extreme events.
The easiest way to conceptualise SMSF member balances is to think of an SMSF’s total value as a pie: the whole pie represents the fund’s wealth which is then divided among the members.
| Assets | Amount $ | % |
| Shares | 820,000 | 58 |
| Cash | 320,000 | 23 |
| Property | 140,000 | 10 |
| Bonds | 120,000 | 9 |
| Total | 1,400,000 | 100 |
Each member owns a portion, with some members having a bigger slice than others.
| Member | Account $ | % |
| Bill: ABP | 622,000 | 44 |
| Bill: Accumulation | 161,000 | 11 |
| Mia: ABP | 350,000 | 25 |
| Mia: Accumulation | 267,000 | 20 |
| Total | 1,400,000 | 100 |
How do I know what my member balance is in my SMSF?
The trustee (usually via their SMSF Accountant) provides each member with a statement, known as a member statement, at least annually, showing your member account balance. You receive a separate statement for each type of account balance you have in your SMSF; a member can have only one accumulation account but may have multiple pension accounts.
The member statement shows the following:
- opening member balance – the closing balance from the prior year, which is nil in the first year of membership
- contributions and rollovers received for the year
- specific expenses – such as insurance premiums
- share of net investment earnings and administration and investment expenses
- tax on assessable contributions – such as employer or member contributions (when you are claiming a tax deduction on those contributions)
- share of tax on net investment income
- closing member balance after completing all calculations above
Hint – if you have segregated assets, the specific income, expenses and applicable tax are allocated directly to your member account and are not included in the general earnings allocation.
What increases a member’s account balance?
Member account balances can be increased by the following:
- Member contributions, i.e. voluntary after-tax contributions, downsizer contributions or eligible contributions in relation to CGT concessions.
- Contributions made on behalf of a member, i.e. employer contributions, spouse or government contributions
- Rollovers from other complying funds
- Allocation of investment earnings (including increases in market valuation of assets)
- Splitting spouse contributions
- Insurance proceeds
What decreases a member’s account balance?
Member account balances can be decreased by the following:
- Lump sum withdrawals
- Pension withdrawals
- Rollovers to other funds
- Death benefit payments
- Allocation of losses from investments (including decreases in market valuation of assets)
- Insurance premiums
- Taxes
- Fund investment and administration expenses
How are investment earnings and expenses allocated to my member account?
Review the fund’s trust deed and governing rules to determine how investment earnings and expenses are allocated to member accounts. Typically, trust deeds may give the trustee discretion in relation to how net investment earnings are calculated or may be more prescriptive. The allocation must comply with the SIS regulations.
The SIS R5.03 provide that investment returns are allocated in a fair and reasonable manner between:
“(a) all members of the fund; and
(b) the various kinds of benefits of each member of the fund.”
Similarly, SIS R5.02 provide expenses are also charged to a member’s account in a fair and reasonable manner.
General fund earnings and taxes are pooled between all members (except for net income and taxes arising from segregated assets) and split to members on a proportional basis. We use CLASS specialised super software to allocate pooled net investment income based on a daily weighted average balance method. A member cannot force the trustee to use a specific method to allocate income.
The following are allocated directly to a member’s account:
- concessional and non-concessional contributions – member, employer or spouse contributions
- contributions tax
- insurance premiums
- net income or losses arising from segregated assets (including movements in market valuation of segregated assets)
- any other specific member expense
What is the daily weighted average balance method?
This method fairly and reasonably allocates pooled fund net earnings, capital gains, expenses and tax among members. CLASS software automatically distributes earnings to member accounts using this method.
It is based on the size of the member’s account balance and the number of days the SMSF held the funds during a financial year. This means large contributions or withdrawals made at the end of a financial year do not significantly affect the earnings allocated to a member.
A simple example to demonstrate the daily weighted average balance method.
The 2026/27 financial year has 365 days. Tom has an opening accumulation balance of $650,000 and makes no contributions or withdrawals during the year. Laura is a new member added during the year, and thus her opening balance is $0. She made an eligible non-concessional contribution of $130,000 on 1 December 2026.
| Tom’s weighted balance | $650,000 x 365 days = 237,250,000 |
| Laura’s weighted balance | $130,000 x 212 days = 27,560,000 |
At 30 June 2027, Tom (before profit allocation) has a balance of $650,000, and Laura has $130,000. The fund has a net profit at 30 June 2027 of $65,000.
Weighted earnings allocation is calculated as follows:
| Total fund weighted days | 237,250,000 + 27,560,000 = 264,810,000 |
| Tom’s percentage | 237,250,000/264,810,000 = 89.59% |
| Laura’s percentage | 27,560,000/264,810,000 = 10.41% |
| Tom’s share of the net profit | $65,000 x 89.59% = $58,233.50 |
| Laura’s share of the net profit | $65,000 x 10.41% = $ 6,766.50 |
How is income tax allocated to my SMSF member account?
Tax is levied at the fund level. The most common tax exemption in an SMSF applies to net income earned from pension assets.
Income tax is allocated to a member’s account proportionally. However, if you have a pension account, no tax is allocated. A transition to retirement pension (TRIS) account is not tax-exempt because it is not in the retirement phase, and its net income is taxed the same as an accumulation account.
We typically associate segregated assets with pension accounts. However, a member in the accumulation phase can, subject to the fund’s trust deed, exercise member investment choice and segregate a specific asset into their accumulation account. At the fund level, there is no tax exemption, but the tax on the net income from the segregated asset is allocated directly to the member’s accumulation account.
Tax relevant to assessable contributions is allocated directly to the member’s accumulation account. Insurance premiums are a direct member expense and are allocated directly to the member’s account.
When can you access your member account balance?
Your member balance is preserved, locked in and cannot be accessed until you have a condition of release (COR), i.e. turning 65 or turning 60 and retired.
When you meet a COR, your eligible super balance, at that time, is transferred to unrestricted non-preserved and can be accessed at any time (subject to the fund’s trust deed). However, if you are under 60, tax may apply to any withdrawal.