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Why Establish a SMSF

Self Managed Super Funds can be a great way to provide for your retirement.

Many Australians take advantage of this alternative retirement savings vehicle.  SMSFs give you greater control in the ability to choose your own strategy and investments, and you can enjoy the same tax benefits as you would with superannuation via regular superannuation funds.

Benefits of a SMSF

A Self Managed Super Fund can provide many benefits, including:

• Control and flexibility – SMSF members can choose where their retirement savings are invested, how your funds are invested and how the SMSF is operated.  SMSF members can also quickly adjust their portfolios as markets change.

• Investment choice – your SMSF can invest in a large range of investments, such as shares, bonds, residential property, commercial property, rural property, cash or any other assets you feel suits the investment objectives of the super fund and provided it meets the sole purpose test.

• Taxation – tax concessions are available for SMSFs.  Self Managed Super Funds are a powerful wealth creation vehicle which enables you to maximise your income and lifestyle in retirement.

• Tax Planning – the primary purpose of a SMSF is to accumulate retirement benefits.  As some contributions are tax deductible, the fund is a vehicle for creating tax deductions.  A SMSF also protects future potentially high returning assets from tax, because the current (March 2011) maximum tax rate in the SMSF is 15%.

• Protection – assets of a SMSF are protected from bankruptcy and other legal claims up to a certain threshold.

• Lower fees and better performance – a December 2009 report, based on ATO and APRA data, found SMSF members generally pay lower fees and that, on average, SMSF investments performed better than all other super funds over 2006, 2007 and 2008.

 Acquire – with certain limitations, it is possible for the SMSF to purchase assets from a member or a member’s company or trust.

 Transfer of assets – within certain limits, it is possible to transfer existing assets directly into a fund and in some cases claim a tax deduction for them.

• Non compulsory withdrawal – if a member is over 65 years old and wishes to keep on working, existing funds can be retained in the SMSF until retirement.  Whereas some funds in rollovers on the other hand must be taken out at 65 years old.

• Convert to a private pension fund – a superannuation fund can convert to a private pension fund.  This allows assets with capital gains to be transferred into an allocated pension account and then sold without incurring any capital gains tax.  This is because the tax rate in an allocated pension account is 0%.  Similarly, investment returns in the allocated pension account are taxed at 0%.  Instead, the member pay tax at his marginal rate on the actual amount of pension received.  Allocated Pension payments attract a 15% tax rebate if you are under 60 years old.  If you are over 60 years old, your allocated pension will be tax free.

• Develop your own annuity – this has similar advantages to the private pension account.  In addition when the member receiving the annuity dies, the funds stay in the superannuation fund.  This can ensure that inheritance complications and capital gains taxes are avoided.

• Maintain multiple members – arguably this is the greatest advantage of a SMSF.  A SMSF can have up to four members.  Some of these could be receiving a pension and other younger members (eg the members’ children) could be still accumulating benefits by contributions.  This allows assets to be moved from account to account to obtain the best tax treatment.

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The information provided on this website, including the material and contents provided in the website publications, are informative in nature only and you should not act specifically on the basis of this information alone. It should not be used as a substitute for legal, business, accounting, tax, financial planning or other professional advice. If expert assistance is required, professional advice should be obtained. Liability limited by a scheme approved under Professional Standards Legislation

Paul Baggetta is the Founder & Principal of Baggetta & Co (ABN 68 786 233 813).

Paul Baggetta has been a Taxation Accountant since 1981, a Financial Planner since 1998, and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading) and operated his own Real Estate business for property investment clients for over 5 years as a second business.

Financial planning services are provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.


Taxation & Accounting services are provided by Paul Baggetta as a Registered Tax Agent (No.61487008) and is a Member of SMSF Association, FIPA & NTAA.