What is Self Managed Super

What is a Self Managed Superannuation Fund?

  • A Self Managed Superannuation Fund (SMSF) has fewer than 5 Members
  • A superannuation fund is established under a Trust Deed, which is known as the fund’s Governing Rules (a set of rules that establish what can and can’t be done).
  • A superannuation fund can be set up by:
    • Individuals
    • Partners
    • Companies
  • A SMSF provides retirement benefits for its members.
  • Each SMSF needs a Trustee.
  • The role of the trustee is to ensure that the fund is run in accordance with its Trust Deed and the law.
  • The Trustee can be individuals or a corporate entity
  • The Trustee and/or members make decisions to invest the fund’s assets (for example: shares, property, cash, unit trusts) for the benefit of the members.
  • The Trust Deed may permit the appointment of an Administrator to carry out the day to day administration tasks of the fund in order to meet its compliance obligations (strict procedures are required to be maintained at all times).
  • Penalties may apply if the Trustee fails to comply with the laws and regulations governing the operations of superannuation funds.

Advantages of a Self Managed Superannuation Fund

  • You are in control.
  • Your fund can accept Concessional (deductible) Contributions (CC) up to the maximum of $25,000 per annum per person or if you were aged 50 or over at 1 July 2007, $50,000 per annum per person until 30 June 2012, and $25,000 per annum thereafter unless your member balance is below $500,000.
  • Your fund can accept Non-Concessional (after tax) Contributions (NCC) of $150,000 per annum per person or $450,000 per person over a three year period for people under the age of 65.
  • You decide how much to contribute. You are not locked into any regular contribution amount.
  • The fund may accept rollovers from all existing complying superannuation funds or Approved Deposit funds.
  • The Trustee makes the investment decisions.
  • The Trustee decides the risk profile, for the return required.

Concessional (15%) rate of tax applies to:

  • Deductible contributions
  • Income to the fund

Concessional (10%) rate of tax applies to:

  • Realised capital gains

What can be done through a Self Managed Super Fund

  • The Fund may invest in shares, exchange traded funds, property, bonds, term deposits, cash, managed investments etc.
  • You can minimise tax payable by the fund and/or receive tax refunds by using franking credits available from shares.
  • The premiums for Death, Total and Permanent Disablement and Income Protection insurances are tax deductible if paid through the fund.
  • On your death, your spouse and financial dependants can receive the balance of your superannuation benefits entirely tax free.
  • The Fund can acquire property used in the business of a member, if the cost of the property does not exceed 100% of the value of the fund after acquisition.
  • The Trustee can enter into an agreement with an administrator to manage the fund, to assist in compliance with the Trustee’s obligations under the law.
  • You can change your administrator without paying any exit fees or penalties.

What can’t be done through a Self Managed Super Fund

  • The Fund cannot lend money to a member or a relative or an associated entity.
  • The Fund is not allowed to borrow money or charge the assets of the fund (that is, the fund assets cannot be mortgaged, or be subject to a lien), unless under specific exemption conditions.
  • The Fund cannot invest more than 5% of its assets by way of loans to or investments in a sponsoring employer.
  • The fund is not allowed to acquire an asset from a member or a member’s relative unless the asset is a listed security or property used in the member’s business.
  • You generally cannot collect preserved benefits before you have retired.

Yearly obligations – The Fund Must:

  • Complete and lodge a Fund Income Tax and Regulatory Return to the Australian Taxation Office.
  • Arrange an Audit of the Fund’s Accounts.
  • Provide Member Statements and financial reports
  • Be managed at all times in compliance with:
    • The Superannuation Industry (Supervision) Act
    • The Income Tax Assessment Act
  • Maintain an Investment Strategy.

Lump sum vs Pensions

Should I Take A Lump Sum or A Pension From My Fund When I Retire?

Lump Sums

  • At retirement, you may decide to cash-in your superannuation fund and invest the proceeds on your own account to provide your retirement income.
  • You may pay some lump sum tax if you are under 60 years of age – this will reduce the amount available for investment.
  • You may pay provisional tax on earnings.
  • You may pay full rates of PAYG tax on your income.
  • You will pay capital gains tax on realised investments.

Pension – Account Based Pensions

Alternatively, you may decide to receive a pension from your fund.

  • No Lump Sum tax payable = larger amount to invest.
  • No taxation on the income – the fund generates a higher rate of return.
  • No Capital Gains tax payable on realised investments.
  • Current rebates allow approximately $25,000.00 to be received tax free for each income stream recipient.
  • You decide the level of income. A minimum withdrawal will apply however there is no maximum unless the pension is commenced under a “transition to retirement” arrangement, whereby a maximum withdrawal of 10% will apply.
  • Lump Sum withdrawals can be made – you are not “locked in”.
  • If you are under age 60, any tax payable is deducted before you receive your income and a group certificate is provided.
  • If you are 60 years of age or over, no tax will apply on income payments or lump sum withdrawals.
  • No provisional tax applies.
  • Pensions can be paid direct to your nominated bank account.
  • Withdrawal of the entire amount is possible if you change your mind.
  • Ease of management in retirement.
  • You can have the same investments through your pension plan as you can with your superannuation fund

Power of Non-Concessional (after-tax) Contributions

If you have assets or cash available outside your superannuation fund, you should consider transferring these to your fund as a “Non-Concessional Contribution” within the contribution limits, prior to retirement; if you are under age 60 when you commence your pension, the income generated on the Non-Concessional component will be tax free and there will be other tax benefits available when you receive your income stream.

You can still access these amounts and you will pay no tax on withdrawals.

Advantage of using Fintech SMSF Administration Service

  • Control how you make investment decisions, sign all returns, minutes, reports and hold all fund investment records.  Fintech SMSF Administration takes care of all the paperwork and data entry.
  • Be confident in your fund’s compliance status.
  • Comply with lodgement deadlines and Improve the cost-effectiveness of your time.
  • Maintain your overseeing function and position of control.
  • Access up to date investment and fund reports at all times during the year on the internet.
  • Administration costs are all-inclusive including statutory charges and audit fees.
  • You have access to technical experts and regular publications on self-managed funds.
  • You have access to free roll-over advice.
  • Superannuation funds can be changed to full Self Managed – Account Based Pension fund service with a small once only charge per member.