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Self Managed Super Funds

Self Managed Super Funds. presenter Barbara Smith CPA CFP Technical Director, Taxpayers Australia Executive Director, Superannuation Australia www.taxpayer.com.au June 2001. Small funds data Dec 2000. A force to be reckoned with: About 215,000 small funds Members: about 427,000

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Self Managed Super Funds

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  1. Self Managed Super Funds presenter Barbara Smith CPA CFP Technical Director, Taxpayers Australia Executive Director, Superannuation Australia www.taxpayer.com.au June 2001 www.taxpayer.com.au

  2. Small funds data Dec 2000 A force to be reckoned with: • About 215,000 small funds • Members: about 427,000 • Assets held: $73 billion • Average assets per member: $147,500 www.taxpayer.com.au

  3. Self managed super funds • have 1 - 4 members, for example: • a single person • husband & wife • 3 friends • 4 family members • 4 individuals in business together www.taxpayer.com.au

  4. If you want to start a SMSF • What you need to do: • decide on the trustee (company or members) • organise and execute the trust deed • admit members and arrange for contributions • Complete and lodge the Application to Register for a New Tax System Superannuation Entities to apply for a TFN & elect to be regulated + an ABN, and if required register for GST www.taxpayer.com.au

  5. Types of small fund • Employer sponsored • A personal fund • but still make sure the deed allows the fund to accept of employer contributions • Self Managed Superannuation Fund • Small APRA Fund www.taxpayer.com.au

  6. Who can be the trustee? • The trustee(s) must be: • for a SMSF • a company with all members being directors, or • individuals with all members as trustees, or • for a small APRA fund • an approved trustee www.taxpayer.com.au

  7. What are the SMSF trustee rules? www.taxpayer.com.au

  8. Advantages of SMSFs • greater control of investments & tax management • ‘I can do it better’ • costs may be lower: • costs of a managed fund include entry, account-keeping and fund manager fees • cost of an self managed fund include set up fees, brokerage and stamp duty www.taxpayer.com.au

  9. SMSFs - Why not? • If the fund becomes non-complying: • tax concessions are lost • can’t accept super guarantee contributions • assets - UCs are taxed at 47% • applies if trustee/members are non-residents Should the gov’t be in the business of ripping off our retirement savings because of technicalities? • if not enough capital costs are higher • time & cost involved in compliance www.taxpayer.com.au

  10. Who cannot be a member of a SMSF? • A person who is an arms length employee of another member UNLESS • the employee is related to another fund member; or • is a director of the employer’s company • a disqualified person www.taxpayer.com.au

  11. Disqualified person rules www.taxpayer.com.au

  12. Deductible contributions • Age based for 2000/01 • under 35 $11,388 • 35 - 49 $31,631 • 50 or more $78,445 • Self employed ded’n $3000 + 75% of excess up to age based limit • employees can claim this ded’n only if they receive 10% or less assessable + exempt income + reportable fringe benefits from employer providing support www.taxpayer.com.au

  13. Sole purpose of superannuation • to provide benefits on: • each member’s retirement • each member reaching 65 or more or • for each member’s dependants if the member dies before retirement or age 65 www.taxpayer.com.au

  14. Investments • You have a wide choice, but they must: • be commercial & arms length • comply with the fund’s investment strategy • not be to lend to or provide financial assistance to members or their relatives • generally not be from related parties • not be encumbered or acquired with borrowed money www.taxpayer.com.au

  15. Investments • No related party can get an incidental benefit • No borrowings or charges • Can buy as tenants in common with a related party www.taxpayer.com.au

  16. Assets than can be acquired from related parties • Limited to • stock exchange listed securities, eg listed shares • 5% of the fund’s assets invested in inhouse assets, ie a loan, investment or lease with a related party (but not a member or member’s relative) • widely held unit trust investments + for self managed funds business real property used 100% for business www.taxpayer.com.au

  17. Your investment strategy • An allocation of assets among the major asset classes that must consider: • risk • expected return • composition/diversification • attitude of members to various investments • liquidity requirements • payment of liabilities www.taxpayer.com.au

  18. Tax on a SMSF www.taxpayer.com.au

  19. CGT payable by the Super Fund • Indexation frozen at 30/9/99 • For assets acquired before 21/9/99 and held for at least one year, the choice of including in assessable income either: • two-thirds the realised nominal gain, or • ALL of the difference between the disposal price and the frozen indexed cost base. • For assets acquired after 21/9/99 & held for at one year+, tax on 2/3rds of nominal gain www.taxpayer.com.au

  20. Tax credits in the SMSF A super fund has $600 taxable conts + $600 capital gain + franked dividends + imputation cr $1000 Tax is calculated: 00/01 • taxable contributions $600 • Capital gain $600 x 2/3 $400 • Franked dividends $660 • Imputation credit $340 • Taxable income $2000 • Tax payable @ 15% $300 • Less imputation credit $340 • Imputation credit refund $40 www.taxpayer.com.au

  21. Getting your hands on the money • When a condition of release occurs your super fund can pay you: • a cash lump sum • an allocated pension - pay yourself variable amounts • a complying pension - pay yourself a lifetime or fixed term pension • Death benefits: • tax free to your tax dependants with your RBL www.taxpayer.com.au

  22. www.taxpayer.com.au • Questions? www.taxpayer.com.au

  23. Superannuation Australia’s services DIY SuperannuationManual + quarterly updates to the Manual + practical seminars to walk you through + quarterly DIY Super Journal + telephone helpline speak to our experts when you need extra help + software BGL simple fund & BGL simple invest + books on superannuation & tax + trust deeds and updates www.taxpayer.com.au

  24. Members of Taxpayers Australia • enjoy benefits that include: • 2000 & 2001 Tax Manual, over 800 pages • our fortnightly Taxpayer journal • discounted services & seminars • our telephone help line to clarify your tax or superannuation problems • ATO/government representation on taxation and superannuation issues www.taxpayer.com.au

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