A self-managed super fund (SMSF) operates within the same rules as other superannuation accounts, however, the investment options available to SMSFs are greater. Not everyone requires an SMSF to have a financially successful retirement. Much of the advice we provide is applicable to all superannuation funds, not just SMSFs.
Investing and retirement advice doesn’t have to be complex. The key is to work out how much you will need. Then most importantly develop a plan to get there. The level of savings you have will determine the quality of your retirement. Aligning investments with your retirement objectives and goals is a smart approach.
An SMSFs flexible structure allows you to tailor your investments and tax outcomes to better match your financial plan. In some large funds, trustees are unable to consider the personal circumstances of members. This means that sometimes they must buy and sell assets at a time that doesn’t suit all their members. Some funds also force members to incur capital gains tax when moving from the accumulation phase to retirement (pension) phase. Unitised funds sometimes deduct capital gains tax from the investments which are built into the daily unit prices.
There have been some recent changes to superannuation which reinforces the need to start planning as early as possible. As of July 2017, there is a new limit on what can be transferred into a tax-free retirement account. Clients can put up to $1.6 million into a retirement income account. For anyone with existing income streams exceeding this limit, there was a requirement to roll anything above this back to the accumulation phase.
Anything above the $1.6m can remain in super (accumulation phase). However, the earnings from the balance over this portion of a super fund are generally taxed at 15%. Which for most people with this level of assets inside superannuation is lower than their marginal tax rate.
Another important change is that clients who have started or decide to start a transition to retirement “TTR” any assets that support this income stream will continue to be taxed at 15%. If a self-managed fund super (SMSF) member ceases an employment arrangement over age 60. This is therefore counted as a condition of release, and your TTR income stream can be converted to a retirement income stream and earnings tax-free. So, if for example over age 60 you decide to do some casual holiday work or filling in for a family business. Then afterwards that employment arrangement ceases. This would meet the condition of release and your fund could move to tax-free earnings again.
With any retirement plan the key is to;
- Focus on what is in your control – how much you can save and where to invest
- Work out your strategy
- Track your progress and adjust as necessary.
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