Super Initiatives FAQ
Below we have a list of most frequently asked questions and answers. Click on a question below to reveal answers, if you still have questions contact us here.
There are many reasons why people choose to run their own super fund:
- Control – with your own SMSF you have control over your investments, timing of your pension payments, your SMSF bank account and your future.
- Investment Choice – your own SMSF gives you access to additional investment choices including direct property, property syndicates, art, coins, metals, jewellery.
- Tax Strategies – better access, flexibility and control over tax planning scenarios that can potentially save you thousands of dollars in tax.
- Fee Structure – transparency in regards to fees, no hidden kick backs to financial advisors or investment fund managers.
- Borrowing for Property – the ability to borrow and invest in direct property through super is a popular reason why people establish an SMSF.
- Insurance – greater choice of insurance policies with more options individually tailored to you.
- Estate Planning – flexibility to minimise the tax you loved ones pay on your death.
Subject to the following exceptions, just about anyone can set up a SMSF.
You cannot have a SMSF if you:
- are insolvent.
- are under 18.
- have been convicted of a dishonest act; or.
- have been banned by the Australian Prudential Regulation Authority (APRA) or the Australian Taxation Office (ATO).
In these cases, you cannot be a trustee or a director of a trustee company.
In addition, if you are not eligible for super choice (eg: government workers), you can only make personal contributions. Your employer will not contribute to a SMSF if you are unable to choose it as your preferred fund.
Yes you can buy property in your SMSF. Currently this is one of the major attractions of SMSF.
You can also BORROW to buy property in your SMSF. This allows you to use your current superannuation balance as a deposit on one or more properties.
Property you can purchase in your super fund includes:
- Direct residential rental property – must be purchased on market from an unrelated party (no – you CANNOT sell you own home to your SMSF).
- Direct commercial or industrial property – you CAN transfer your business premises or farm to your SMSF and rent the property from your SMSF. You can also buy direct on market.
- Residential or commercial property via a unit trust – in this way you can pool SMSF monies with other like-minded SMSF owners and purchase more expensive property.
- Syndicated property trusts that invest in commercial developments for national tenants (e.g. Hungry Jacks, Woolworths, Bunnings, Banks).
Significant tax strategies are available to make the most of your investment in property through SMSF.
Generally, you can get by with a minimum of two individual trustees for your SMSF. It is not ideal, but saves you the cost of setting up a company trustee.
You MUST have a company trustee if you are a single member. You cannot be the sole individual trustee of your SMSF.
It is recommended that you have a company trustee in the following circumstances:
- You are over 55 for estate planning purposes.
- You want to invest in direct property – the banks prefer company trustees and give you a higher loan to value ratio.
- You want complete segregate SMSF assets from those in your own name – important with multiple land holdings.
With a SMSF you have a vast array of investment options, many of which are not available via Retail or Industry funds. What’s more, you have the ability to buy and sell investments WHEN YOU CHOOSE. Your SMSF can make the following investments:
- Term deposits
- Shares – Australia and International
- Property – Direct
- Property – Syndicated
- Collectables (art, cars, jewellery, antiques, wine)
- Foreign Exchange
- Managed funds
- Loans to certain people / entities
- WRAP accounts
The taxation of SMSFs is complicated. There are three categories of tax payable:
Contributions to your fund that your employer or yourself has claimed a tax deduction for are taxed at the rate of 15% flat. These are known as concessional contributions and include:
- Super guarantee contributions by your employer
- Salary sacrifice contributions by you
- Contributions your business has made
If you make a personal contribution to your SMSF and don’t claim a tax deduction, this amount is NOT taxed at all in the SMSF. It is tax free.
Tax on earnings
If you are under 55 years old;
- the income you earn on your SMSF investments are taxed at 15% flat.
- capital gains are also taxed at 15% flat, however if your SMSF has held the asset for more than 12 months, this rate is reduced to 10%
If you are over 55 years old and in pension phase.
- all income and capital gains are tax free.
Tax on benefit payments
When you withdraw your super benefits, the tax position is as follows:
If you are over 60 years old;
- Lump sum benefits – no tax on lump sum super benefits paid provided a condition of release has been satisfied.
- Pension benefits – no tax on your pension receipts from your SMSF provided a condition of release has been satisfied.
If you are between age 55 and 60;
- Lump sum benefits – you can take $ 185,000 tax free provided you satisfy a condition of release. Any more than this and tax will apply at various rates depending on the components of your SMSF balance.
- Pension benefits – you can start a transition to retirement pension and will be taxed at your marginal rate. A 15% tax rebate generally applies.
Yes you can. Subject to certain tests, you can access your super for the following reasons:
- severe financial hardship
- medical treatment or medical transport
- to meet home loan repayments to prevent foreclosure or forced sale by the bank on your main residence
- for costs to modify the your main residence or vehicle to accommodate your or your dependant’s special needs arising from severe disability
- expenses associated with palliative care for yourself in the case of impending death
- expenses associated with a dependant’s palliative care, in the case of impending death, or their death, funeral or burial
- expenses in other cases where the circumstances are consistent with the grounds outlined above as determined by APRA.
Super Initiatives specialises in all aspects of SMSF.
Established in 1997, we have established a reputation for outstanding levels of proactive advice and client service.
As Chartered Accountants and Registered Mortgage Brokers, we are in a unique position to offer our clients a vast array of SMSF services.
We don’t just “crunch the numbers” and send you a bill – we take an interest in you, your family and financial health.
We pride ourselves on our professionalism and commitment to client service. We take a holistic approach to your financial goals and help you achieve them sooner.