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What is a self manages super fund (SMSF)?
Property investment through a self-managed super fund (SMSF) is becoming an increasingly popular choice for people wanting to start or further develop their investment portfolios.
At WT Capital, we are your SMSF property investment experts. We’ve helped hundreds of people maximise returns and gain a higher level of flexibility over their retirement savings through SMSF property investment.
What is an SMSF?
An SMSF is a super fund that is started and managed by yourself as the fund's trustee. This differs from a professionally managed fund — such as a retail or industry fund — where your super is managed for you, and in which you are a member of the fund, but not a trustee. Sometimes, a third party will be recruited to help manage the SMSF.
An SMSF can have a maximum of six members, and in most instances, these members must all be trustees of the fund. SMSFs provide trustees with a greater level of control regarding investment choices and opportunities, with the fund tailored to meet individual needs.
How does it work?
SMSFs are set up to provide financial benefits in retirement to their members. The trustees manage the fund by making investment decisions in the fund’s name. Legally, SMSFs must have a fully documented investment strategy, which is used to guide the trustees' investment decisions.
After signing a trust deed, the SMSF operates as its own entity. It must have its own Australian Business and Tax File numbers and a bank account to allow for investments, lump sums, pensions to be paid, and contributions and rollovers to be received.
Establishing an SMSF can be a time-consuming and complex process — it is therefore important that you work with credible financial professionals to avoid costly mistakes. At WT Capital, we work with trusted partners to provide you with a complete SMSF setup process, including organising an SMSF loan.
Who can be a member of an SMSF?
All members of an SMSF must be its trustees. To be eligible as a member of an SMSF, an individual must accept their responsibilities as a trustee by signing a trustee declaration.
They cannot be registered as bankrupt, have a current working relationship with another member (unless they are related), or have been previously disqualified as an SMSF trustee. If under 18, a member must be represented by a trustee who can act on their behalf.
Lastly, if there are any corporate trustees in the SMSF, each member must also be a registered company director.
Advantages of an SMSF
There are many advantages to establishing an SMSF:
More investment control — One of the most significant advantages of SMSFs is the greater level of control and flexibility that members have over where money is invested — including property.
Tax concessions and benefits — SMSFs are usually taxed at the concessional rate of 15%, and any benefits received by members after the age of 60 are tax-free. Also, when compared with other funds, SMSFs generally have greater flexibility for using tax strategies around taxable income and capital gains.
Asset protection — SMSFs provide a practical way to protect their member’s assets from future bankruptcy risks or creditor claims.
Cost-effective — SMSFs can be more cost-effective than other funds to operate as they grow.
At WT Capital, we’re committed to providing our clients with smart SMSF property investment solutions. If you’re ready to explore this exciting option further, check your eligibility, or take a look at some previous case studies. We also provide a handy retirement calculator for your convenience! If you have any questions about our services, please get in touch with our friendly and professional team today.
Frequently Asked Questions.
A self-managed super fund is a fund that is set up and managed by one or more members, who also serve as the trustees of the fund. This is in contrast to professionally managed funds, where the super funds are managed externally, and members are not trustees.
After the SMSF is created, its trustees make investment decisions on behalf of the fund, complying at all times with a documented investment strategy. The SMSF must have its own ABN, TFN, and bank account to operate as a legal entity. For information on how to start an SMSF, get in touch with the team at WT Capital today.
The main benefit of an SMSF is the greater control and flexibility it affords its members in terms of investment choices. SMSFs also come with significant tax benefits, concessions, asset protection and estate planning benefits.
Although there is no minimum balance needed to set up an SMSF, the fund is generally more cost-effective with a balance of $250,000 or more. If the combined benefits are lower than $200,000, the fund set-up costs are not likely to be cost-effective compared to a professionally managed fund.
Yes, you pay tax on an SMSF, but it will generally be taxed at the 15% concessional rate, as long as it complies with SMSF rules and laws.
SMSFs generally allow you to invest in a more extensive range of assets than professionally managed funds. Such assets include residential and commercial property, Australian and international shares, term deposits and cash, fixed-income products such as bonds, physical commodities, and certain collectables.
Generally speaking, you can only withdraw money from an SMSF if you meet one of the “conditions of release”. These include reaching preservation age and retiring (or transitioning to retirement), ceasing employment at age 60 or over, or reaching 65 years of age (regardless of retirement status). A component of your benefits can also be released due to special circumstances — refer to the ATO for a full listing of these circumstances.