Self Managed Super Funds (SMSF's) - It's all about control.
Having an experienced investment manager look after your superannuation in a retail or industry fund suits many people. However, it means members have little control over specific asset choice. Consequently, more and more people are realising the advantages of making their own investment decisions regarding their retirement, and taking control of their own superannuation funds.
The main motivation for setting up an SMSF is generally the desire to exert more control over your superannuation. Other advantages include:
Greater investment choice;
Greater control over investment strategies;
Access to investment gearing opportunities;
Ability to better manage fees and costs;
Can be used for efficient estate planning.
Is an SMSF for me?
There is no doubt there are advantages to SMSFs, however you need to consider if an SMSF is the most appropriate for you. You should consider:
Is the fund strictly for retirement benefits?
Do you have the time to manage your own fund?
Are you able to adhere to regulations for SMSF trustees?
Will the benefit be worth the cost?
How will switching to an SMSF affect your current superannuation benefits?
We can help with your SMSF queries. We take a holistic approach towards investment and have specialised accountants and financial planners to meet your individual needs. It is important for you to get professional advice on whether an SMSF is feasible for you. we invite you to talk to one of our highly skilled Financial Advisers. We can help you establish, manage, administer and form an investment strategy. Give us a call on 08 7477 8252.
SMSF owners, hold on to your caps
If you have a Self-Managed Super Fund, you should be keeping a close eye on your contributions throughout the financial year – not just at year-end. There’s always a lot of talk about super contributions towards the end of the financial year, but 30 June doesn’t have exclusive rights on super strategies. In fact, leaving all of your super strategies until the end of the financial year may mean missing opportunities around your contributions caps – some of which can take months to play out.
Let’s take a look at one strategy that’s of particular interest for SMSF owners; non-concessional contributions.
What are non-concessional contributions?
Non-concessional contributions are super contributions that come from your personal savings. Unlike concessional contributions, non-concessional contributions are not taxed at 15% by your super fund. That’s because you’ve already paid income tax on this money when you earned it. The other key difference is that the annual limit on non-concessional contributions is much larger (at $180,000p.a.), compared to only $30,000 for concessional contributions (which used to be $50,000 for people over age 50). Importantly, you also have the opportunity to make an even larger one-off contribution by taking advantage of the ‘bring forward’ rule.
What is the ‘bring forward’ rule?
If you are under age 65, you can potentially bring forward three years’ worth of non-concessional contributions into one financial year – effectively allowing you to contribute up to $540,000 in one year. This could be particularly useful if you sell an investment property, your business, or maybe downsize your house and free up a large sum of cash. The key benefit of this strategy is that you pay a maximum of 15% tax on interest or investment earnings inside super, compared to your marginal tax rate outside super. Also, once you’ve converted your super into a pension account, those earnings will be tax-free. If you have more than $540,000 (assuming you haven’t already triggered the ‘bring forward’ rule in the past period), there is an opportunity to contribute $180,000 at the end of one financial year – making sure you don’t trigger the ‘bring forward’ rule – and then waiting until July the following year, where you can then utilise the ‘bring forward’ rule and contribute up to $540,000.
Can I transfer assets other than cash?
In most cases, non-concessional contributions are made in cash. However, SMSF owners can also make an ‘in specie’ transfer of certain types of assets – such as ASX-listed shares, or a commercial property (residential property is not allowed) – as long as the market value of those assets does not exceed $540,000 at the time of contribution. Remember, the penalties for exceeding your contributions caps are harsh. You will pay 46.5% tax on the excess amount, and any excess amounts will be included in your concessional contributions cap for the year.
Could you be getting more wear out of your caps?
Even if you don’t have a large amount to contribute to super, you could still use your concessional and non-concessional contributions caps to boost your retirement savings. To ensure you’re managing your SMSF for maximum benefit, and staying within the rules, make an appointment with Humble Goode Financial.