Setting up your self-managed superannuation fund (SMSF) can be a great idea if you invest time to develop a strategy and understand your responsibilities that include:
- Keeping records,
- Providing statements,
- Managing pension plans,
- Managing retirement strategies, and
- Preparing tax returns.
It’s important to be aware of the costs of setting up your SMSF, which will include professional legal and accounting advice to establish the trust structure and trust deed.
You’ll also need to pay ongoing services and reports required by regulation, such as the preparation of financial statements and tax returns to the ATO, an annual audit of all financial records by an ASIC-approved auditor, an annual compulsory SMSF supervisory levy to the ATO and potentially, a corporate trustee fee.
The general consensus is that you should have at least $500,000 invested in an external superfund before you set up your SMSF, although starting with less may be justified in certain circumstances.
There are many benefits to managing your SMSF, the first of which is that you have control of where your money is invested and you have greater options to choose from, such as:
- Overseas assets,
- Direct shares,
- Residential and commercial property,
- Collectibles, and
- Term deposits.
An SMSF also offers strategic ways to save tax and free your capital for other growth opportunities.
If you own your business structure, your SMSF can own business property and lease it back to your business. You’ll have your own premises from which to work and your SMSF will have a steady stream of revenue; plus, you’ll free-up capital for other growth investments.
If you don’t need to work from your premises, you could use your SMSF to borrow money to buy an investment property that may pay dividends in retirement. But don’t be fooled into thinking your SMSF can buy a holiday home or artworks for you to enjoy. That would be illegal.
If you sell your SMSF’s property 12 months after purchase, your fund will get a one-third discount on capital gains made on its sale, bringing that rate down to a maximum of 10%.
There are also benefits when you are ready to retire… For example, you’ll be able to take a tax-free pension as an income stream upon retirement. And, if the assets held in your fund will generate sufficient revenue, you can simply keep living off the income without the need to sell up. Importantly, once your retirement phase pension begins, capital gains and income are taxed at 0%.
In the event of your death, a strategically planned SMSF may enable dependents to receive your fund’s assets tax-free while non-dependents may receive them nearly tax-free.
Need help? Contact the Ayers Group
Before you decide on establishing an SMSF, talk to a professional. At the Ayers Group, our contractor management team can help you out by connecting you with wealth planning and superannuation experts. You might also visit The Australian Securities and Investments Commission website for further information.
The Ayers Group can free you to pursue new opportunities by helping manage your contractor administration, maintain your legal compliance and grow your wealth. Talk to an expert at the Ayers Group today.
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