More than just a superannuation fund
Saving for your retirement with a Self Managed Superannuation Fund (SMSF) is a growing trend in Australia, with over 600,000 people investing nearly $7 billion to take control of their retirements.
There are a number of benefits to saving for your retirement via an SMSF, but what many people don’t realise is that the government offers a wide range of tax benefits and deductions that make Self Managed Super Funds an attractive wealth building proposition.
1. 15% Tax rate
The earnings within your superannuation fund are taxed at only 15% and any earning within the pension phase are tax free. But remember – to be entitled to this rate, your fund has to be a ‘complying fund’ that follows the laws and rules for SMSFs. For a non-complying fund the rate is the highest marginal tax rate. To check whether your fund is complying, speak to a Reventon advisor who can ensure you’re ticking all the boxes.
2. Capital Gains Tax discount
If you have held an asset for longer than 12 months through your SMSF, you are eligible for a Capital Gains Tax discount of one third. This applies before the asset is added to your taxable income, which results in an effective tax rate of only 10%. With this kind of discount, the tax savings on your SMSF investments could be significant.
3. Exempt current pension income (ECPI)
Any investment income that your SMSF receives from its assets is tax exempt, meaning there is no tax paid on income or capital gains on assets that are backing a pension. This income is called exempt current pension income, or ECPI. It can be claimed once your SMSF begins paying one or more retirement phase income streams. For more information on ECPI, speak to one of our accounting team experts.
4. Franking credits
If you are invested in Australian companies, you will likely receive franking credits on dividends from your shareholding – essentially credits for the tax the company has already paid. Any franking credits earned are refundable to your SMSF fund. These credits are earned at the company tax rate of 30% and help lower the effective tax rate of your Self Managed Super Fund even further.
5. Insurance premiums
Insurance premium payments are generally tax deductible when the cover is held through an SMSF. This includes life insurance, endowment, TPD, and income protection. Not that the insurance premiums are deductible to the SMSF rather than the individual, but even so this effectively allows you to pay for your insurance with pre-tax dollars.
Wealth creation, tax and SMSF can be complicated
If you are confused or overwhelmed, don’t worry, you are not alone. While there are plenty of tax benefits of an SMSF, not many people are aware of them all or how to apply them to their SMSF – particularly without professional guidance.
That’s why at Reventon we provide expert knowledge of the SMSF benefits you could receive, and support you along the way to implement a successful fund. We leave no stone unturned when it comes to savings you could make, to maximise your income and wealth for the future.
To find out more, or to learn how an SMSF fund could work for you, your tax bill, and your future retirement, book a free consultation with one of our experts today.