According to the Australian Taxation Office statistics, the total assets held in SMSFs was over $450 billion as at October 2012. There were just under 500,000 SMSFs set up on behalf of more than 900,000 members. In 2011/12 35,276 SMSFs were opened up from 28,031 in the previous year.
It is estimated that SMSFs control approximately one third of all superannuation money held in Australia.
Many people don’t understand superannuation. They think it is an investment and all too often they haven’t been happy with it’s performance. Superannuation is not an investment. It is an investment vehicle. It is a tax structure with generous tax concessions. It is the performance of the investments held in the structure that determines if your superannuation grows over time.
The tax concessions for superannuation are designed to encourage people to save for retirement. Concessional contributions are taxed in super at 15% compared to your individual marginal tax rates which may be much higher. The investment earnings inside a superfund are taxed at 15% whilst the funds are accumulating. Capital gains are taxed at 10% if the assets are held for over one year. Scenarios mentioned in this paragraph assume that the concessional contributions caps have not been breached.
If you are over 60, the benefits you take out of super as either lump sums or pensions are tax free. Further if you are a retiree and are drawing pensions from super, the investment income generated on your super is tax exempt.
Because of these tax concessions, there are restrictions on what you can put in and how and when you access the benefits.
A SMSF is a superfund for which you are the trustees and the only members.
The benefits of having a SMSF are largely to be in control of your super and to have more flexibility with your investments. As the trustees of your SMSF you are responsible for investing the SMSF’s funds. How the fund performs will depend on where you invest the funds. If you accumulate large amounts in super there may also be an administration cost saving.
SMSFs allow you to invest in a wide range of investments including direct property (houses, commercial, industrial, farms etc), direct shares (listed and unlisted), term deposits, cash, managed funds, gold, silver, collectibles etc etc (subject to restrictions).
SMSFs do have costs. There are costs for establishment, annual administration, preparation of tax returns and annual financial statements, audit and investment advice.
SMSFs are not for everyone. Flor-Hanly often uses SMSFs as part of a business owner’s holistic planning. They are used to tax effectively accumulate wealth to provide for retirement.
The information contained on this page is of a general nature only. We recommend that you seek professional advice prior to making any changes to your superannuation. This information should not be perceived to be advice, as we have not taken into consideration your needs, objectives or your current situation.
The Trustee for A F Olsen Discretionary Trust Trading As Flor Hanly (ABN 54 681 099 832) is a Corporate Authorised Representative No. 124 3967 of SMSF Advisers Network Pty Ltd (ABN 64 155 907 681) AFSL No. 430062.
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