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What are an SMSFs Benefits?

Asset Protection

Self-managed super funds can be used as an effective tool for protecting members’ assets against bankruptcy or creditor clams. For this reason, SMSFs are quite attractive to professionals and business owners as superannuation funds are not considered to be property in relation to the bankruptcy ACT.

Increased Tax Flexibility

An SMSF that complies with super legislation allows members to have their contributions and earnings within the fund taxed at the concession rate of 15% up to a certain limit. This makes superannuation an effective investment tool. It is also important to note that benefits within the fund received after the age of 60 are tax-free. Earnings within the fund when the SMSF is in the pension mode of the fund are also tax-free and SMSFs potentially offer strategies around taxable income capital gains tax and franking credits.

Increased Control Over Investments

Another attraction to SMSFs over Public Offer Funds is that they offer trustees more control over where funds are invested. They also offer some investment opportunities that public offer funds do not such as direct residential or commercial real estate investments.

Who Can Be a Member of an SMSF?

In an SMSF all members are also required to be Trustees of the fund and if the fund has a corporate trustee then every member will need to be a director of said company. The company will have to be registered with ASIC and any directors of the company will therefore be members of the corresponding SMSF.

Some of the regulations required to be a member of an SMSF include that members mustn’t:

  • Have been previously disqualified as an SMSF trustee by ASIC the ATO or by a court
  • Have an employer-employee relationship with another fund member unless they are related
  • Be a registered bankrupt

Costs of Setting Up an SMSF

According to a statement from ASIC in 2018 the cost of setting up an SMSF ranged between $900 and $2000, with the average cost for ongoing administration and operating expenses $3500 per year. Costs vary dramatically depending on your needs, making an in-depth analysis essential to determine the value of an SMSF for your specific requirements and balance.

Initial costs include:

Setting Up The Structure of The Fund

  • preparing the SMSF’s investment strategy.
  • making the fund’s investments.
  • accepting SMSF member contributions.
  • appointing an approved auditor who is currently registered with the Australian Securities and Investments Commission (ASIC).
  • lodging the SMSF’s annual tax return with the Australian Taxation Office (ATO).
  • paying member investments.
  • keeping SMSF records to ensure regulatory compliance

Setting Up the SMSF Trust Deed

  • how the fund will be established,
  • how it will operate,
  • and how it will be administered.

Ongoing Costs

  • The preparation of financial statements.
  • The preparation and submission of a tax return to the ATO.
  • The payment of a compulsory annual SMSF supervisory levy to the ATO.
  • A corporate trustee fee (if applicable).
  • An annual audit of all financial records. This audit must be conducted by an ASIC-approved auditor.