Ten Considerations


The majority of people see their family as the most important aspect of their lives. Members with a SMSF are provided with the opportunity to build strong foundations to build a comfortable retirement income stream for their immediate family. Simper Super has increased this opportunity, a member of a SMSF can leave their superannuation benefits in the fund until their death.


One of the main reasons for establishing a SMSF is to ensure that when an individual ceases to earn income, he or she will have the financial ability to keep the lifestyle that he or she is accustomed to. The SMSF has a range of income options that can be modified to a member and their families’ lifestyle in retirement. Under simpler super reforms the number of pensions that may be offered by the trustee of the fund for a member upon retirement is significantly greater than what may be offered by retail or industry based superannuation funds.


If an individual's health fails, he or she needs to have access to a protected, secure income that takes the financial worry. Health is one of those things that should be taken for granted so if an individual’s health fails, he or she needs to have access to a protected, secure income that takes the financial worry out of becoming seriously ill or temporarily incapacitated. A SMSF allows members access to a range of benefits in time of sickness or ill health. This is the case even if the sickness is a temporary nature.


Most people who find their way into these funds want to have their say in the way their superannuation is invested. The SMSF trustee has the power of choosing investments; however care needs to be taken to ensure that the trustee meets the appropriate superannuation rules in terms of investment choice. These rules include the need to apply an investment plan and ensure that no asset of the fund is used by a member of the fund or relative.


The government has provided rules in the bankruptcy laws that broadly protect a member's benefits in the fund from creditors. If an unfortunate financial event occurs, this can be a relief. If a member of an SMSF becomes bankrupt they will need to transfer their benefits into a managed fund as bankrupts are ineligible from being a trustee or member of a SMSF fund.


From the age of 55, members of a SMSF born before 1 July 1960 have the unique ability to access their superannuation benefits as a pension at the same time as working. From age 55-60 the pension will form part of the member’s assessable income, however it will draw 15% tax. It is proposed under the Simpler Super reforms that from age of 60 any pension income from small business owners, professionals or other persons will be able to access tax-effective pension income while working. At the same time they may contribute their pre-tax wages or business profits into their SMSF (subject to certain limits). This means that if they can set in place a ‘transition to retirement’ pension as their key source of living expenses while contributing wages into a SMSF a reduction in overall personal taxation may occur. A detailed SMSF TV program the transition to retirement strategy can be seen at www.smsfstrategies.com .


According to Grant Abbott, author of ''Guide to Self-Managed Super Funds'', the SMSF is by far the most flexible, most targeted and most tax effective vehicle to provide lump sums or income streams to a member’s spouse, children or grandchildren when the member dies – and it lets the member control the process without fear of legal challenge. Importantly a member’s SMSF estate planning strategy resides outside the members will. Many SMSF members and trustees are not aware of this therefore neglect to put strategies in place a SMSF estate plan and therefore miss out on highly valued taxation concessions and are also opening the deceased member’s benefit to legal challenge. Our trust deed covers this.


The Simpler Super reforms have given a generous increase in the assets test, thereby increasing the possibility of access to the aged pension. Some members if they choose to warehouse the majority of their assets into the SMSF (with the exception of the family home) to access the age pension on top of the private pension that they acquire from the fund.


Under legislation it is possible for a superannuation fund to split their super with their spouse. Spouse includes a de facto spouse under the superannuation laws. Where both spouse members are between 55-60 years of age and using the transition to retirement strategy the benefits of the 15% tax rate is maximized. Further, where one member is older than the other and will as a result. Reach the tax-free pension and/or lump sum status before the other, then it makes strategic sense to split any contributions for the younger spouse to the older spouse.


Taxation in Australia is significant, the government has chosen to save on future welfare payments by providing taxation incentives for people to become self-funded retires. Members of SMSF's have the best opportunity to reduce the taxation burden. For example, the tax-free nature of private pension and lump sum arrangements for a SMSF after aged 60 is one of the highlights of the Simple Super reforms. The new reforms eliminate reasonable benefits limits, meaning that once a member turns 60, there is no limit on the amount of tax-free superannuation benefits that they may take.

DISCLAIMER: This information is necessarily general and has not been prepared with reference to your specific objectives, financial situation or needs. Superannuation Recall Consultants do not hold an Australian Financial Services Licence and recommend that you should seek professional advice from a trusted financial adviser before making any decision regarding the services offered by SRC or associated companies from this site.