What differentiates a Self Managed Super Fund from other Super Funds?
Self Managed Super Fund (SMSF) are different from other types of funds as they can only have between 1 and 4 members and the fact that all the members of the Fund must be Trustees of the Fund. This means the members of the Self Managed Super Funds have greater control to run the fund for their own benefit. They are also responsible for complying with Australian Superannuation and tax laws.
What does the Average Australian Self Managed Super Fund look like?
Based on 2014 Data, 47.9% of Australian Self Managed Super Funds managed between $200,000 and $1,000,000 of assets, with an average assets base of $564,086. More than 90%* of these funds members were aged between 35 to 74 years of age.
What does the Average Australian Self Managed Super Funds return?
In 2014, the Average Australian Self Managed Super Fund had a return of 30.7%, which was down 0.1% on the previous year. According to industry statistics, this figure is nearly twice the return on the average Super Fund performance in Australia.
ATO Annual SMSF population analysis tables
What is required to establish a Self Managed Super Fund?
Every Self Managed Super Fund has to have its own bank account. It also must have a ‘trust deed’, which needs to outline the ‘rules of operation’, including who qualifies as a member and how they are admitted. The ‘trust deed’ should also outline what investments the fund can make and who can receive a death benefit.
What are the compliance requirements of a Self Managed Super Fund in Australia?
The two most important annual compliance obligations of an Australian Self Managed Super Fund are an audit and the need to lodge a tax return with the ATO.
What are the benefits of a Self Managed Super Fund?
Increasingly, the age pension is looking like a pipe dream for future generations of Australians, which is why getting the best return on your Super investments today has become a priority. Many Australians believe that the best returns can be achieved with a Self Managed Super Fund. This is particularly true of small business owners.
Self Managed Super Funds provide more control and flexibility over investments, often have lower fees, and can potentially outperform other Industry and other Super Funds.
For a small business owner, one of the major benefits of a Self Managed Super Fund is that it provides an opportunity to take full advantage of the current Superannuation tax benefits and potentially in the right circumstance purchase their own business factory, office or shop.
You’re in control over your retirement
Most Super Funds do not allow you control over where you retirement dollars are invested. With a Self Managed Super Fund, you can build and manage your own portfolio of investments. You can also determine the risk profile you want (e.g. high risk/hi return for short term gains, or low risk for security). Many small businesses even include ‘business real property’ (property used wholly and exclusively for business) in their portfolios.
Under the right circumstances, your Self Managed Super Fund can be used to borrow to buy real estate and other assets; however, we suggest you talk to the Bizally team before making such a decision.
Taking advantage of Australian Tax Concessions
Even though there is much talk in the political arena about changing the rules around Self Managed Super Funds, today they provide members with considerable tax benefits.
Today small businesses can purchase their business properties and pay rent directly to their Self Managed Super funds. Additionally, anything you earn today through your Self Managed Super Fund is taxed at a lower rate of 15%. Even Capital gains are taxed at 10% if they are held in your fund for more than 12 months.
Should every Australian small business owner establish a Self Managed Super Fund?
Like most financial decisions, setting up a Self Managed Super Fund requires a degree of ‘due diligence.’ The common belief is that if you have $200,000 is a Super Fund, it is worthwhile setting up your own Self Managed Super Fund. That is not always the case. In reality, there are no ‘hard and fast’ rules about when to set up a Self Managed Super Fund.
As a small business owner, a Self Managed Super Fund is an effective way to reduce your tax burden and increase your personal wealth. However, with the complexity of how the fund must be run, the range of investment options and the ever-changing rules can have major impacts on your responsibilities as a member and trustee, so it is strongly advised you seek help from a professional.
Bizally helps many of its small business clients establish and run their Self Managed Super Fund, providing insights into the most effective way to increase returns, tax options and ways to reduce compliance and running costs.
If you are unsure if a Self Managed Super Fund is the right choice for you, contact Bizally today to arrange a discussion.