SMSF Advice

In the right situation, SMSFs can be very lucrative. However, it’s important to understand the risks before establishing a fund. Generally speaking, SMSFs are beneficial to those with a large super balance (over $200,000), investing and legal experience, and enough time to manage a fund.

Self Managed Super Funds are just that; self-managed. Therefore, you need to have the time and expertise to do just that. If you lack either, a SMSF can be detrimental to your financial future. For this reason, many turn to expert Gold Coast SMSF advisors, such as Centaur Financial Services.

For an SMSF to be worthwhile, the general consensus is that you need to have accumulated at least $200,000 of superannuation. However, a report from The Productivity Commission found that on average, SMSFs with balances below $500,000 have lower returns after expenses and tax compared to APRA-regulated funds (a standard superannuation fund). This being said, there are times when starting balance, under $500,000 may be financially beneficial and that a starting balance of $500,000 may not be helpful. It depends on your circumstances, experience, and investment goals.

To find out if you have enough money to establish an SMSF, arrange a complimentary meeting with one of our SMSF advisors Gold Coast.

One of the main attractions of setting up an SMSF is to use your superannuation to purchase property. The incentive here is that you are only taxed 15%, which can be substantially lower than your personal tax rates.

However, you can only purchase property through a SMSF, if you follow the rules.

Any property you invest in must:

• Pass the ‘sole purpose test’; whereby it is purchased only to offer members retirement benefits
• Not be purchased by any relations of a fund member
• Not be occupied by a fund member or fund member relations
• Not be rented by a fund member or any fund member relations

A SMSF provides the financial freedom to invest your superannuation where and how you like, so long as it complies with the investment restrictions. In general terms, you cannot acquire assets from, or lend money to fund members or relations, and your fund cannot borrow money. However, it can invest in the following investment opportunities:

• Australian Shares
• International Shares
• Residential Property
• Commercial Property
• Gold and Silver
• Non-traditional assets (art, coins, antiques, collectibles, etc.)
• Cryptocurrencies
• Cash and Term Deposits
• Managed Funds

It’s tempting to withdraw money from a SMSF, and you can; however, you should be aware of the penalties first. SMSF can pay benefits by means of an income stream, lump-sum figure or a combination of both, but if you withdraw money from your super fund without following the rules and regulations, you may face heavy penalties.

The ATO states, “As a trustee, if you knowingly allow illegal access to super you may incur penalties of up to $504,000 and jail terms of up to five years, or fines of up to $2.52 million for corporate trustees.”

Less-severe penalties include higher taxes or disqualification from being able to operate as a trustee of an SMSF.

It’s always best to talk to your SMSF advisor before withdrawing money from your super fund.

SMSF withdrawals can be either a lump-sum payment or a pension, where you receive periodic payments. To receive pension payments, you must first reach the preservation age, which varies depending on your date of birth. Pension payments can be either Account-Based Pension or Transition to Retirement (TTR). You can receive TTR  payments as soon as you reach the preservation age, however, to receive Account-Based Pension payments, you need to be over 65 or retired, and have reached the preservation age.

To receive a lump-sum payment, you must meet the condition of release specified by your fund. Be mindful though; there are tax consequences of taking $200,000 or more as a lump-sum payment.

Find out more on our Centrelink and Age Pension page.

It’s best to talk to your Gold Coast SMSF advisor to see which option is best for you.

Once you are fully retired, you can possibly live in your SMSF property if you are structured properly. You cannot, however, live in the property until you retire or reach the preservation age. And there are more conditions and aspects to think about.

For more information on SMSFs, visit the Australian Taxation Office (ATO) website.