Self Managed Super Funds (SMSFs) grow extremely fast in the superannuation industry these years and become a very popular way for people to save and invest for retirement. Our SMSF experts in CLY Tax Accoutants & Bookkeepers Croydon have dealt with lot of existing and newly established SMSF recently in the Croydon areas plus Ringwood and Lilydale. The difference between an SMSF and a retail or industry superannuation fund is that each member of the SMSF is also the trustee (or director if there is a corporate trustee), which means you can set up and directly manage your own private super fund but under certain rules regulated by ATO.
Benefits of SMSF
• Direct control of your own super. It’s up to you to decide where and when you want to invest.
• Greater investment Flexibility, including equities, cash, term deposit, properties (business or residential), even collectables and personal-use assets and much more. (Some condition / rules may apply)
• A perfect tool for Tax Planning strategies, including lower tax rate on income and contribution and capital gain tax discounts.
• Generally lower fund running cost than retail or industry superannuation funds
• A better vehicle than the traditional Testamentary Trust in respect to Deceased estates.
• Retirement planning – payment of pensions
• A very cost effective way to buy insurance
An example of how SMSF can be a cost effective way to buy insurance is:
John is 50 years old and works as a gardener with 40% effective tax rate. He has life insurance out of SMSF with the annual premium of $2,000, which obviously costs him $2,000 post-tax money. However, if John has his own SMSF, he can contribute $2,000 pre-tax money into his SMSF and buy the life insurance through the SMSF, in which case the insurance premium will cost him only $1,200 post-tax money. Therefore, $800 can be saved for John to buy insurance through SMSF.
Moreover, SMSF can provide you with much more choices for buying insurance with customized conditions than the industry or retail funds, which will normally only provide limited insurance products with general conditions.
Although SMSF is definitely one effective way for you to plan your retirement, there are still many things to be considered before and after you set up an SMSF, such as whether SMSF is right for you, what investment strategy will best suit your SMSF or how to make your SMSF compliant with related ATO rules, etc. It is highly recommended that you Contact the SMSF advisers and professional Accountants in CLY Tax Accountants & Bookkeepers Croydon if you would like to explore further details about SMSF, a private discussion or appointment can be arranged at your convenience.
The information provided in the newsletter is just general SMSF information which cannot be solely relied on for making any investment decision. The investment discussed in this newsletter does not consider any investor’s specific personal circumstance, and may not be suitable for all types of investors.