What you need to know about a self-managed super fund?

Thinking about managing your own super? Read this first.

Everyone has a superfund, but not everyone has their own superfund. Setting up a self-managed super fund (SMSF) gives you control over how your super is working for you. While you still can’t access the money before you retire, once you reach retirement, the benefits are huge. There are many restrictions on exactly how you can operate a superfund.

Here are some of the main aspects you need to know about if you’re thinking about starting your own superfund.

You can only have four members

All members are trustees of the fund (unless you have a corporate trustee) and are responsible for the operation of the fund.

You can’t withdraw it until retirement

Like all superfunds, your money is there until you reach retirement age. It can’t be withdrawn early as emergency funds or as a cash backup for big purchases. The point of a superfund is to invest your funds and build wealth for retirement.

You get access to discounted tax rates

SMSFs are looked at favourably when it comes to tax. All members are taxed at 15% of their net income until they reach retirement age. One third of any capital gain is also not taxable. The biggest tax advantage is when you reach retirement age. The SMSF does not pay any tax on the portion of the net income funding your retirement benefit and your pension is also tax-free.

There are two types of contributions

Generally you can contribute to your superfund at any time (providing you meet certain conditions) and your contributions fall into one of two categories: concessional and non-concessional. Concessional contributions count towards your taxable income, while non-concessional contributions aren’t.

Contributions have caps

Concessional contributions are capped at $25,000 per financial year for all members as of 1 July 2017.

From 1 July 2017 non-concessional contributions are capped at $100,000 per financial year for members 65 years and over, but under 75 years. For members under 65, they can contribute $100,000 per year or $300,000 over a three-year period.

But be aware: exceeding a contribution cap will result in heavy penalties from the ATO.

Should you start an SMSF?

This article touches on some of the main aspects of starting and running an SMSF. However, in reality, it is much more complicated. If you’re interested in a self-managed super fund, make sure you get professional advice before embarking on this journey. You can visit the ATO’s website, or if you prefer a personal touch, contact us. At Teamwork Accounting our Accountants and Financial Planners can help clients set up and manage your SMSF for the best results.

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