Our understanding is that it is not legally required for set of SMSF Financial Statements to include a Member Statement. However, Member Statements are usually prepared as part of the Financial Statements for the purpose of keeping track of the taxable and tax free components in their respective accounts as each component is taxed differently. The reasons for doing so are noted below:
- If a Member chooses to start a Transition to Retirement pension, they will need to include the taxable component of the pension received from the SMSF in their personal assessable income. The tax free components, however, will not be taxed at the Member’s personal tax rate. In this case, having a clearly defined taxable and tax free components in the Member Statements can assist with this process.
- Upon the death of the Member, the benefits will be paid to their respective Death Benefit Nominees. In this case, the taxable components received by the nominees will be taxed in their personal capacity and the tax free component will not be taxed. If the Member, before death withdraws a lump sum consisting of both tax free and taxable components and subsequently puts the amount back into the SMSF as a non-concessional contribution, the entire amount contributed will be treated as tax free.