When your SMSF term deposit matures, you’ll need to decide what to do next. You can decide this at the beginning of the term or any time before your term deposit matures or during the ‘grace period’ that your authorised deposit-taking institution (ADI) offers on maturity. You may choose to reinvest, withdraw some or all of the funds, or explore new investment options. This article covers some of the different paths you can take when your SMSF term deposit matures.
Key points covered
- Options at maturity and instructions
- Grace periods
- Early withdrawal considerations
Maturity instructions and options
When setting up your term deposit, you can choose to provide maturity instructions that outline what happens when the term ends. You can adjust these instructions any time before your term deposit matures (and, in some cases, up to 10 days after it matures – also known as the ‘grace period’).
Here are some of the most common SMSF term deposit maturity options available
1. ‘Hands-off’ renewal
If no new instructions are given before maturity, your ADI may automatically roll over the balance into a new term deposit of the same length where you have consented to this. This can be convenient if you prefer a ‘set and forget’ approach, but it’s important to be aware that the new term deposit could have a different interest rate (which may be higher or lower than your original interest rate).
If you don’t make any changes during the grace period (see ‘SMSF term deposit grace periods ’ below), you might be locked into the new term without the flexibility to adjust until the next maturity date.
2. Proactive management
For those who want more control over their SMSF term deposit, proactive management at maturity can offer more flexibility. Instead of having your SMSF term deposit roll over automatically, you can use this opportunity to compare prevailing interest rates, adjust the term, or add extra funds if needed.
ADIs are required to send reminder letters before the SMSF term deposit matures, giving you time to review your options and make an informed decision on what to do next.
3. Full or partial withdrawal
On maturity, you may also opt for a full or partial withdrawal of the funds. You can:
- Withdraw the entire balance, including the interest you’ve earned, and move it to another account of your choosing.
- Withdraw part of the balance while reinvesting/rolling over the remaining money into a new SMSF term deposit.
Keep in mind that if you’re choosing a partial withdrawal and reinvesting the rest, you must still meet the ADI’s minimum deposit requirement (if it has one).
SMSF term deposit grace periods
On maturity, a grace period, usually lasting between 7 and 10 days, gives you a chance to change your SMSF term deposit maturity instructions without penalties.
This window is available even if you set instructions at the start, providing flexibility if your financial situation or market conditions change.
You’ll either need to contact your ADI before your term ends, or during the grace period window, and provide instructions on what you want to do with your funds.
It’s important to act within the grace period, as adjustments (without penalty) may not be allowed once the grace period ends. After that, any changes might incur early break costs or require waiting until the next maturity date (unless financial hardship applies).
Choosing the right maturity option
Choosing what happens when your SMSF term deposit matures depends on several factors, including (but not limited to):
- The current interest rate environment
- Your SMSF’s long-term strategy
- Any upcoming cash flow needs
There is no one-size-fits-all maturity option, and it’s worth taking the time to discuss options with your SMSF trustee(s), and a financial advisor, if applicable.
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