Superannuation – we all have it, we all contribute to it, and we all have to manage it. Superannuation can be the most tax-effective method of saving (depending on your age and circumstances) as you may benefit from a lower tax rate. But, you may be asking, what type of superannuation fund is appropriate for my needs?
You may currently have funds invested in an external superannuation account such as an industry or retail super fund. But, dependant on what your retirement plans are or if you’re looking at ways to take control of your savings, you could open a self-managed superannuation fund (SMSF) instead.
With a SMSF, there’s significantly more flexibility and control over your investments – you can plan for your future and, to some degree, take advantage of tax concessions to grow your wealth. You are in control of the way your retirement savings are invested, which may help fast-track this growth. But, there are responsibilities coming with this control.
Who are the super users of SMSFs?
According to the Australian Tax Office, there are currently 1.1 million Australians with a SMSF account and, in 2017, 83% of SMSF members were over the age of 45, with the average age sitting at 56. However, over the past few years, there’s been a growing trend of members aged between 25 to 49 years old switching to SMSFs. Currently, the most popular time to establish a SMSF is between the ages of 35 and 44. Younger to middle-aged people are considering alternative methods to manage and grow their wealth. But what about salaries? In 2016, the average taxable income of all SMSF members in the year was $109,000 and overall, members of SMSFs had higher average and median taxable incomes than non-SMSF members.
What’s the difference between a SMSF and other types of super accounts?
Members of a SMSF are usually the trustees, which essentially means members of the SMSF run it for their own benefit. However, with great power, comes great responsibility. Members of a SMSF are responsible for complying with the super and tax laws and a SMSF must be run for the sole purpose of providing retirement benefits for the members or their children. It’s also important to understand that there can be significant costs involved with establishing a SMSF, so it’s important to make sure that the benefits outweigh the costs.
Do I have to manage my SMSF on my own?
The good news is that accountants can help with the management of your SMSF. Working closely with a tax accountant can give you peace of mind that your SMSF is compliant with all Australian laws.
An accountant can assist with:
- Establishing your SMSF as well as the transfer of any assets
- Advising you and other trustees of your legal obligations and responsibilities
- Assisting with fund compliance
- All regular auditing that’s required
- Preparation of all annual accounts, annual tax returns for the SMSF, trustees’ minutes and all other required statutory documentation
- Continually monitoring your fund to ensure there aren’t any contraventions.
Is a SMSF right for me?
Before jumping in, consider if a SMSF is right for you:
- The first thing to do is to form an investment strategy. Find out how much money you have and what you want to do with it. You must also find out if the investment is allowed by law for a SMSF. If you don’t have a plan, you may find you’re better off leaving your money in commercial funds
- Find out about your responsibilities and form procedures to avoid non-compliance
- Find out about the costs of running the fund, including your time. Look into if the fees you pay in your current superfund are not lower.
- Consider the chance that your superfund may cause cancellation of your current life insurance policy you hold through this account.
At Business Tax and Money House, we’re highly experienced in opening and managing SMSFs for our clients. We pride ourselves on our knowledge around tax-effectiveness, protection of assets, applicable laws and regulations that must be followed. If you’d like to learn more about SMSFs or wish to speak with someone regarding opening an account, please reach out to us today.
