Superannuation is a way to save for your retirement in a tax effective way; through the introduction of the super guarantee and its subsequent increase over the years, your employer must pay 11% of our salary into a super fund. You also have the opportunity of contributing your own money or capital into superannuation in various ways up to the age of 75 whether you are an employee, sole trader or small business. You can also receive additional benefits from the government in the form of a co-contribution or tax concessions.

Over your working life your superannuation is invested to accumulate funds in addition to your contributions to live off in your retirement. There are complex rules relating to contributing funds to super and accessing your super but with the right advice, a sound strategy could help you save tax and generate the nest egg for retirement that you are seeking.

Super funds can also assist in the funding of insurance premiums to develop your protection plan and some types of Income Protection, Total and Permanent Disablement (TPD) and Life Insurance can be held through your super fund.

Is an SMSF right for you?

Self-managed super funds (SMSFs) are the largest and fastest growing super sector in Australia and for many good reasons. But before you start an SMSF, it’s important to weigh up both the advantages and disadvantages and consider seeking advice to determine whether an SMSF is right for you.

SMSFs can offer a number of features and benefits generally not available with other super options.

You can establish your own investment strategy and directly control where and how your super is invested. You can select from a wider range of investments including all listed shares, some unlisted shares, residential and business property, and collectables such as artwork, stamps and coins. You can set up a fund for yourself and up to three other people and consolidate your super balances. This could enable you to invest in assets of higher value than if you set up a fund with fewer members, achieve greater estate planning flexibility, and reduce fund costs. Your SMSF could make a larger investment in assets such as shares and property by using cash in your fund and borrow the rest. With SMSFs you can take greater control over the timing of tax events such as starting a pension without triggering capital gains tax when your superannuation assets move into pension phase. You may also have the option of transferring certain assets that you own into your SMSF. You can nominate who you would like to receive your super when you pass away without having to meet some of the constraints that apply to other super funds.

While an SMSF can offer greater opportunities to take control of your retirement savings, there are some potential disadvantages you should also consider. SMSFs generally only become cost-effective if the fund has $200,000 or more invested. This is particularly true where you outsource and pay for most or all of the fund administration. When you set up an SMSF, you and any other fund members will generally need to be trustees (or directors of the corporate trustee) and will be responsible for meeting a range of legal and other obligations.

The Australian Tax Office has the authority to impose various treatments to deal with SMSF trustees who have breached super laws. These include:

  • requiring trustees to complete certain educational requirements within certain timeframes
  • disqualifying an individual from acting as a trustee or director of a corporate trustee 
  • imposing significant administrative penalties on individual trustees and directors of corporate trustees 
  • applying through the courts to impose civil and criminal penalties, and
  • giving notice to a trustee to freeze the SMSF’s assets where it appears that their conduct is likely to adversely affect the interests of beneficiaries. 

You will need to have enough time, knowledge and skills to manage your own super and meet your legal and other obligations.

If you are considering the establishment of an SMSF or currently utilise an SMSF we are here to provide you with professional advice and guidance when deciding on the best superannuation solution for you. We also recommend that you also seek advice from a registered tax agent to determine the tax implications for you before setting up an SMSF.