My Tax Accountant

 

Back to Articles Menu

 

next Article >>

 

<< previous Article
ARTICLE 7:

Self-managed Superannuation Funds - SMSF

Setting up a SMSF

If you have decided to set up a SMSF, we can execute the SMSF for $550 using individual trustees. If you would prefer a corporate trustee, we charge $1,250.

 

Running a SMSF

Fees and charges are an important factor when saving for your retirement, which is why we offer annual compliance from $1,100 including audit and two hours of face to face tax planning. This fee will be tax deductible to the fund.

Most expenses that are incurred by the SMSF in deriving income will be deductible, although SMSFs work a little differently than most other entities. For example, an expense that has a private element cannot be claimed as tax deductible because the SMSF is not a business. The ATO’s taxation ruling TR 93/17 discusses the income tax deductions available to superannuation funds in more detail, if you have the desire to do independent research.

 

Contributions

Contributions to a SMSF can either be concessional or non-concessional:

       - Concessional contributions: Before-tax contributions, taxed at the concessional rate of

         15%; and

       - Non-concessional contributions: After-tax funds added to the SMSF, the SMSF will not get

         taxed on this again.

 

Concessional contributions

The cap for concessional contributions is generally $25,000 per income year. Contributing $25,000 per year can be a great tax strategy for most working Australians as the average Australian is taxed at 34.5% on their personal income, while only getting taxed at 15% on contributions in the fund. This $25,000 contribution would save the average Australian $4,875 per annum in tax. You do not need a SMSF to take advantage of this strategy.

 

Non-concessional contributions

The non-concessional contributions cap from 1 July 2017 has decreased to $100,000. If you’re aged 64 or younger you can still bring forward your non-concessional contributions over three years.

 

Taxation of fund income

Generally, the income of the fund is taxed at 15% while capital gains are taxed at 10% when you’re in accumulation phase. When you retire and start a pension, the income may be tax free.

 

For example:

       - You may own a rental property in the SMSF during your accumulation phase and pay 15%

         tax on your net income between the ages of 45-60.

       - Upon turning 60, if you satisfy the necessary rules, you may now use the property to

         support a pension in the fund and be taxed at 0%. Then, if you were to sell the property

         and make a large capital gain this gain may also be taxed at 0% as the asset was used to

         support your pension.

 

Taking money from your fund

As superannuation is money invested for a person's retirement, strict government rules prevent early access to preserved benefits except in very limited and restricted circumstances. These include major dental, and drug and alcohol addiction recovery.

Generally, superannuation benefits fall into three categories:

       - Preserved benefits;

       - Restricted non-preserved benefits; and

       - Unrestricted non-preserved benefits.

Preserved benefits are benefits that must be retained in a superannuation fund until the employee's preservation age. Currently, all workers must wait until they are approximately 60 before they may access these funds, but the actual preservation age varies depending on your date of birth.

Restricted non-preserved benefits although not preserved, cannot be accessed until an employee meets a condition of release, such as terminating their employment in an employer superannuation scheme.

Unrestricted non-preserved benefits do not require the fulfilment of a condition of release and may be accessed upon the request of the worker. For example, where a worker has previously satisfied a condition of release and decided not to access the money in their superannuation fund.

Benefit payments may be a lump sum or an income stream or a combination of both, provided the payment is allowed under super law and the fund's trust deed. In either case, eligibility for access to preserved benefits depends on your preservation age and meeting one of the conditions of release. Conditions of release:

       - Before age 60, you must have retired.

       - Aged 60 to 65, you have to cease employment regardless of your future employment

         intentions, as long as you are not working at the time.

       - Aged over 65, you can access your superannuation regardless of employment status.

 

 

Disclaimer: This document should not be interpreted as tax advice. All information is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.

 

 

Copyright My Tax Accountant 2021. ABN: 13 346 093 125.
Website by roarDADA Designs.