As little children, we’re preoccupied with choosing what adventure to embark on and what part of our home or neighborhood to explore. Our days are carefree and joyful. However, once we reach adulthood, we’re forced to start thinking about our future and the one of our loved ones. Since nobody knows what tomorrow holds, making plans and arrangements that can protect us from unwelcome events is a must.
When it comes to securing our financial future, setting up an SMSF (Self-Managed Super Fund) is an option that simply must be taken into consideration. Read on to learn the basic requirements of an SMSF and what benefits this unique superannuation fund offers.
An SMSF is a retirement fund set up and run by maximum 4 members. Each SMSF member must also be a trustee of the fund, and all trustees must be members. The main purpose of an SMSF must be to provide its members or their dependants with retirement benefits. Setting up an SMSF to get early access to your super or to purchase artworks for your home is illegal.
Many individuals choose to start their own SMSF because this superannuation fund allows them to be in charge of the whole decision-making process. In other words, the members of an SMSF both have the freedom and the responsibility to manage the fund’s assets, determine its investment strategy and select the best investment options in accordance with it.
The Smsf tax return is another strong reason to give SMSFs a chance. The Smsf tax return includes the income tax, the regulatory and the member contributions reporting. Superannuation is taxed at lower rates to motivate people to lock their money away for retirement. The tax in an SMSF during the contribution stage is usually 15%, whereas in the retirement stage it is 0%.
Certain contributions received by a complying SMSF are included in the fund’s assessable income and are taxed at 15%. They include employer contributions (including contributions made under a salary sacrifice arrangement), personal contributions that are going to be claimed as tax deductions, and generally any contribution made by anybody other than the SMSF member.
When at least one SMSF member has an account in the tax paying phase, it’s important for the SMSF trustees to know which expenses of their fund are tax deductible. Actuarial costs, accountancy fees, audit fees, costs of complying with Government regulations, investment adviser fees, and other administrative costs incurred in managing the fund.
As you’ve probably already realized, an SMSF yields many benefits, which explains why these superannuation funds have become so popular.