What is an SMSF Release Authority?

The ATO authorise a SMSF to release a member’s super balance early to pay for such things as:

• excess concessional contributions (ECC)
• excess non concessional contributions (ENCC)
• division 293 tax (additional tax on concessional contributions for high income earners)
• first home super saver scheme (FHSS)

Timing is critical

The SMSF cannot release the super money before the member lodges an election form with the Australian Taxation Office (ATO) and the SMSF receives a release authority from the ATO.

Paying the money from your fund’s bank account before receiving the ATO’s release authority can be treated as illegal early release of super.

The details of the due dates and payment dates differ depending on the type of release authority. Ensure you read the instructions the ATO send to you.

What to expect

Generally, releasing super is a 3-phase process.

Release authorities for SMSFs are required to use SuperStream.  There is an exemption which includes the ATO issuing a paper release authority by mail and the SMSF trustee is not able to use SuperStream to respond to that release authority. If the release authority is initiated using paper then the response must be returned using paper.

Release authority process

1. An excess contributions determination letter is sent to the SMSF member or tax agent by the ATO providing details about the type of release, amount to be released, options available and due date when the election has to be made. A notice of assessment and a separate election form is sent to a SMSF member in relation to a division 293 tax determination.
2. The SMSF member completes the election to release the amount identified in the ATO correspondence and returns the election to the ATO – The election can be made by paper or electronically through myGov or your tax agent can make the election on your behalf.
3. The ATO send a Release Authority to the SMSFs electronic service address (ESA) and a message is sent through to the fund administrator, nominated software or an SMSF messaging provider. Provided there are no error messages the SMSF must then arrange for an electronic funds transfer which must include the “payment reference no.” (PRN) in the description which allows the payment to be matched to the release authority. On completion the SMSF must confirm the payment was made via SuperStream.

First Home Saver Super Scheme (FHSS)

Under the FHSS the SMSF member has to apply to the ATO for a FHSS determination via the member’s MyGov account and then within 60 days of the determination being made the member can request a FHSS release request which also must be done via the member’s MyGov account. The ATO will then issue a release authority to the SMSF which is sent through electronically as per the SuperStream process above.

Hint – the date due for the payment of a division 293 tax payment is different to the due date to make an election for the release of tax by your SMSF. To ensure compliance it may be better to pay the tax personally and then request the release of super. Do not pay the ATO from the fund’s bank account until a release authority has been received.

Payment of the Release Authority

The payment in accordance with the release authority is required to be made to the ATO who will then deduct any additional tax which may be applicable and if the member has outstanding tax liabilities or another Commonwealth agency (except for HECS/HELP), the ATO will apply the remainder against those liabilities and refund the balance to the member.

Generally, the SMSF must release the member’s super money within 10 days of the release authority being received.