SMSFs can offer a number of features and benefits generally not available with other super arrangements.
More investment control
You can establish your own investment strategy and directly control where and how your super is invested. You’ve also got the flexibility to create an investment strategy that addresses the combined or unique needs of all fund members.
More investment choice
You can select from a wider range of investments including:
• all listed shares
• some unlisted shares
• residential and business property, and
• collectables such as artwork, stamps and coins.
One fund for the family
If you set up a fund for yourself and up to three¹ family members, you could:
• consolidate your super balances
• invest in assets of higher value
• achieve greater estate planning flexibility, and
• reduce costs.
Borrowing to make larger investments
SMSFs can buy assets such as shares and property by using cash in the fund and borrowing the rest. This can enable the fund to acquire assets it currently doesn’t have enough money to purchase outright.
With SMSFs you can:
• take greater control over the timing of tax events, such as when capital gains and losses on assets are realised
• transfer certain assets directly into your fund by making ‘in specie’ contributions, where investment earnings will be concessionally taxed, and
• use your super to start a pension potentially without triggering capital gains tax.
Also, if a member dies or becomes disabled, the fund can claim the future service element of the benefit as a tax deduction and offset current and future fund tax liabilities.
Cost-effective Critical Illness insurance
You can arrange for your SMSF to take out Critical illness insurance for you and other members. By doing this, you may benefit from some upfront tax concessions when making super contributions, or fund the premiums without affecting your cashflow.
Greater estate planning certainty and flexibility
You can nominate which of your ‘dependants for superannuation purposes’² you’d like to receive your benefit in the event of your death without having to meet some of the constraints that apply to other super arrangements.
Other super benefits
Just like other super funds, if you have an SMSF:
• you may be able to make contributions from your pre-tax salary or claim your contributions as a tax deduction³
• investment earnings are generally taxed at a maximum rate of 15%
• there’s no tax on investment earnings if you use your super to start a pension investment4
• you won’t pay tax on lump sum and pension payments received at age 60 or over5, and
• your fund can arrange cost-effective Life and Total and Permanent Disability insurance.
Is an SMSF right for you?
While running an SMSF can give you greater control of your super and retirement savings, it’s a big commitment. All members are generally required to be fund trustees and vice versa. This means you are responsible for meeting a range of legal and administrative obligations and penalties may apply if you don’t perform your duties. Also, to make running an SMSF a cost effective exercise, you and your fellow members will typically need upwards of $250,000 in super.
Advice and support
A financial adviser is best set to help you navigate through the complexities of an SMSF and decide whether it’s right for you.
They’ll be able to help:
• develop and implement an investment strategy for the fund
• select investments to match that strategy
• determine the right insurance
• implement a tax-effective pension plan, and
• evaluate your estate planning options
Many financial advisers also recommend using a comprehensive SMSF administration service. These services can provide the legal, accounting, auditing and other support you’ll need to run your fund and meet your compliance obligations.
To find out more about setting up an SMSF and the support services you may need, please contact Integral Financial Planning on 07 55592250 located on the Gold Coast.
1 The maximum number of members an SMSF can have is four.
2 A ‘dependant for superannuation purposes’ includes a legally married or de facto spouse (including same sex), child of any age, financial dependant, interdependent person and the legal personal representative of the deceased.
3 To be eligible to claim your super contributions as a tax deduction, you will need to earn less than 10% of your assessable income, reportable fringe benefits and reportable employer super contributions from eligible employment and meet a range of other conditions.
4 A pension investment can generally only be commenced when you reach your preservation age (currently 55) or over.
5 Provided the pension and/or lump sum is received from a taxed super fund.