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Post on 22-May-2015



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A presentation about Self Managed Super Funds by Hanrick Curran


  • 1. Managed Superannuation Funds

2. Superannuation - Overview1. Why save using superannuation?2. Superannuation funds available in Australia3. Self Managed Superannuation Funds Setting up a SMSF Running an SMSF Advantages of SMSFs4. Making an informed decision on whether or not a SMSF isright for youexperience. new thinking 2 3. Why save using superannuation?experience. new thinking 3 4. A word about savingWhy Save? To spend on living home, car, family, lifestyle Retirement when income from working stopsWho will pay for your retirement? Government? You?experience. new thinking 4 5. Government Policy Government funded basic age pension means tested Encourage private savings & investment Compulsory employer superannuation support: The Superannuation Guarantee Tax concessions: Negative gearing tax deduction forinterest on income earning investments Dividend imputation refund of tax paidby listed companies on profits paid asdividends Superannuationexperience. new thinking 5 6. Compulsory Superannuation Superannuation Guarantee (SG) Employer funded retirementYearSG Rate - % ofordinary timeearnings2014/2015 9.5%2015/2016 9.5%2016/2017 9.5%2017/2018 9.5%2018/2019 10.0%2019/2020 10.5%2020/2021 11.0%2021/2022 11.5%2022/2023 12.0%SG rate frozen at 9.5%experience. new thinking 6 7. Voluntary superannuation saving Government tax concessions to encourage you to contributeto superannuation: Tax deductible superannuation contributions:1. Salary sacrifice above the 9.5% compulsory rate2. Self employed - tax deduction against business income Low rates of tax on earnings by superannuation fundinvestments while accumulating during your working life Tax free retirement lump sum or pension on retirement afterage 60experience. new thinking 7 8. Is Superannuation the right taxconcession for you?1. Negative gearing taxdeduction for interest on incomeearning investments2. Dividend imputation refund oftax paid by listed companies onprofits paid as dividendsPersonal taxrates up to 49%3. Superannuation tax deductionfor contributions, low tax oninvestment earningsTax on earnings ofsuperannuation investments While accumulating 15% When retired & drawing asuperannuation pension tax freeThe big trade off of with superannuation? Usually better tax savings Vs Cannot spend savings until retirementexperience. new thinking 8 9. Superannuation Fundsexperience. new thinking 9 10. Choice of Superannuation FundAustralia has $1.85 trillion saved in superannuation funds* There are currently around 535,000 SMSFs in Australia SMSFs control almost 1/3rd of Australias superannuation wealth* APRA Statistics as at 30 June 2014experience. new thinking 10 11. Choice of Superannuation Fund1. Employer default superannuation fund:Must be a MySuper approved fund: Provides minimum life insurance cover; Maximum direct member feesIncludes Industry Funds, Retail & CorporateFunds2. Your own Choice of Fund: All complying superannuation funds,including SMSFs; No minimum requirements for insurancecover or fees3. Self employed: All complying superannuation funds,including SMSFs* APRA Statistics as at 30 June 2014experience. new thinking 11 12. Self Managed Superannuation Fundsexperience. new thinking 12 13. Choice of Superannuation Fund* APRA Statistics as at 30 June 2014experience. new thinking 13 14. Public-Offer Funds Vs SMSFsexperience. new thinking 14 15. Self Managed Superannuation Funds (SMSFs)Q: How many members cana SMSF have?A: Up to 4 membersBut typically, 2 members Mum & Dador 1 solo memberexperience. new thinking 15 16. Self Managed Superannuation Funds (SMSFs)Q: What can a SMSF invest in?A: Most investments!Subject to some restrictions like including lending theSMSFs money to yourself, your relatives or yourbusiness.Typical SMSF investments: Cash Fixed interest e.g. bonds term deposits Listed Shares Real Estateexperience. new thinking 16 17. Self Managed Superannuation Funds (SMSFs)Q: How do you get money into an SMSF?A: Contributions1. By your employer Super Guarantee +salary sacrifice contributions; or2. Personal contributions (from your privatesavings)3. Roll-overs from other superannuation fundsQ: How much can be contributed?A: Contribution Caps apply to each individual Concessional (tax deductible) contributions; or Non-Concessional (undeducted) contributions (from yourpersonal savings)experience. new thinking 17 18. SMSFs - Establishmentexperience. new thinking 18 19. Self Managed Superannuation Funds (SMSFs)Q: How do you establish an SMSF?A: Once you decide you want a SMSF:1. Lawyers draw up a trust deed which becomesthe governing rules of the SMSF. The SMSF musthave a trustee, either individuals or a company2. The prospective members & trustee(s) sign thetrust deed to create the SMSF.3. The SMSF is registered with the ATO and receivesits own ABN & TFN4. You open a bank account for the SMSF in its nameat a bank of your choice5. You roll-over benefits from other funds or makecontributions into the SMSF bank account6. You may exercise a Choice of Fund to have youremployer contribute to your SMSF7. You formulate an investment strategy & begininvestingexperience. new thinking 19 20. Self Managed Superannuation Funds (SMSFs)Q: How do you establish an SMSF?A: .5. You roll-over benefits from other funds or makecontributions into the SMSF bank account6. You may exercise a Choice of Fund to have youremployer contribute to your SMSFCaution! If you roll-over some or all of your superannuation benefits from a large fund,you may lose some or all of your life insurance cover in that fund. If you reduce or stop employer contributions to a large fund, you may alsolose life insurance entitlements in that fund Life insurance cover in a large fund can often be transferred to your SMSF,without having to go through medical exams. This is a good starting point in your decision process You may need a licensed insurance professional to advise & assist youexperience. new thinking 20 21. SMSFs - Membershipexperience. new thinking 21 22. Self Managed Superannuation Funds (SMSFs)Q: How many members cana SMSF have?A: Up to 4 membersTypically, 2 members Mum & DadQ: Who else can be a member?A: Adult children? Yes, but consider: superannuation(in any fund) is a maritalasset, that can be split on divorce or de-factoseparation. Children cannot inherit their parentssuperannuation. On death of the lastsurviving member who is not a taxdependant, all remaining benefits must bepaid out of the fund, typically to theirEstate.Note: tax dependant means a spouse, or childunder age 18 or any person in an inter-dependencyrelationship with you .A: Your business partners?Yes, but consider divorce risk andbusiness/partnership breakdownA: Your unrelated employees?No.experience. new thinking 22 23. SMSFs The Trusteeexperience. new thinking 23 24. Self Managed Superannuation Funds (SMSFs)An SMSF must have a trustee!Trustee is responsible for: Investing on behalf of the members Receiving contributions from members ortheir employers Paying benefits to members Paying taxes and expenses of the SMSF Reporting to members & ATOAll within the rules & requirements of: Superannuation Industry (Supervision) Act & Regulations SIS Income Tax Assessment Acts Various other laws e.g. Super Guarantee, State based laws.experience. new thinking 24 25. Self Managed Superannuation Funds (SMSFs)Q: Who can be a trustee?Q: Who must be a trustee?A: Trustee can be: At least 2 individuals; or A companyA: All members MUST be: trustees; or directors of the trustee companyQ: What about a single member?A: You can:1. have one other individual trustee who is not requiredto become a member; or2. be the sole director of a trustee companyexperience. new thinking 25 26. Self Managed Superannuation Funds (SMSFs)Q: Should I have individual trustees or a create acompany trustee?A: Having individual trustees is cheaper because a companycosts money to buy and maintainHowever, a company can be better for a few reasons:1. Estate planning; a company continues on seamlessly after death of amember/director, whereas individual trustees need to bereplaced. Ensuring succession to the role of trustee when you die Administrative ease2. Limited liability3. SMSF Borrowing? Banks want a company trustee.experience. new thinking 26 27. Self Managed Superannuation Funds (SMSFs)SMSF Trustee requirements: You must be 18 years of age or more You cannot be under a legal disability You cannot currently be insolvent(e.g. bankruptcy) You cannot have prior convictions in respectof dishonest conductQ: Who regulates SMSFs?A: The Australian Taxation Office (ATO)Trustee declaration:You have to make a declaration to the ATO that: You are eligible to be a SMSF trustee/trustee director; & Accept & understand the responsibilities of being a SMSFtrustee/trustee directorexperience. new thinking 27 28. Self Managed Superannuation Funds (SMSFs)ATO Regulates SMSFs & says:1. SMSF Trustee education is very important2. Persons who demonstrate that they are notsuitable to be SMSF trustees should be excludedfrom having their own fundSMSF Penalty Regime From 1 July 2014If you break the rules: Rectification directions requiring a SMSFtrustees to rectify a breach of the SMSF rules Education directions requiring SMSF trustees toundertake an approved SMSF education course. Administrative penalties - assessing a monetarypenalty for certain breaches of the SIS Act &Regulations which govern the operation of SMSFsexperience. new thinking 28 29. Self Managed Superannuation Funds (SMSFs)SMSF Penalty Regime From 1 July 2014If you break the rules: Administrative penalties - assessing a monetary penalty for certain breachesof the SIS Act & Regulations which govern the operation of SMSFsexperience. new thinking 29 30. SMSFs The Rules!experience. new thinking 30 31. Self Managed