self managed super fund

Are you starting to think about how you can maximise your superannuation for retirement? We’ve helped hundreds of Australians grow their wealth through a self-managed super fund (SMSF). 

Meet Melanie and Stuart

Melanie and Stuart are in their early forties. With approximately 25 years left until retirement, they wanted to maximise and accumulate their superannuation balance. 

They both had industry superannuation funds. Melanie had a current superannuation balance of $210,000 and Stuart has a balance of $205,000. They both receive approximately $10,000 of superannuation every year from their respective employers and wanted to make additional contributions from time to time. They both liked the idea of investing in property within a Self Managed Superannuation Fund (SMSF) so decided to seek advice from APS Tax & Accounting.

After discussing their situation and ideas with the APS team, Melanie and Stuart were able to successfully set up a new SMSF with a strategy to help them maximise their superannuation earnings.

Corporate Trustee

Melanie and Stuart purchased their SMSF with a corporate trustee to protect assets and ensure ease of compliance in the years to come. Having a corporate trustee makes it easy and more cost-effective to add or remove members. Legal ownership of assets does not change when a director/member is added or removed. There may be fewer problems for succession planning where you have two members and one passes away, as the remaining member can stay as the sole director of the trustee company. ATO administrative penalties apply to the corporate trustee, not each director. 

Bare Trust

They also purchased a Bare Trust with a corporate trustee to enable them to obtain a loan to purchase the investment property.  Without a Bare Trust, a SMSF cannot borrow.

Both Melanie and Stuart are directors of the trustee companies for their SMSF and Bare Trust which means that together they are in control of, and responsible for, the fund and the decision-making processes centred around making investment decisions.  As trustees of their SMSF, they like the fact that they enjoy a fair amount of flexibility with the type of investments they can hold.

Purchasing property

Their SMSF borrows 60% of the value of the property. The balance of the purchase price of the property is funded by existing superannuation that was rolled over from their industry funds into the SMSF.

The remaining funds from their rollovers were invested according to their investment strategy in a share portfolio and cash investments to ensure the SMSF complies with the diversification rules.

Investment Strategies

As trustees, Melanie and Stuart have a duty to make, carry out, and document decisions on how their SMSF assets are invested and to carefully monitor the performance of these investments. This duty involves formulating and implementing an investment strategy. The investment strategy should take into account: 

  • Risk vs return
  • Diversity
  • Liquidity
  • Ability to discharge liabilities as they fall due, and
  • Insurance needs of the members.

All of the compliance needs are taken care of by APS Tax & Accounting, including annual superannuation fund tax return, financial statements, independent audit, and ASIC requirements.

Salary Sacrificing

Both Melanie and Stuart have requested that their employers salary sacrifice $2,000 from their wages over the year into their SMSF, which they know they won’t miss too much.  Doing this each year will boost their super balance over the years with compounding earnings and will also save them approximately $800 of tax per year.

What happens next?

Melanie and Stuart plan to hold the investment property until they reach retirement.

Before retirement, SMSF’s pay 15% tax on earnings which is far lower than their marginal rate of 34.5% which results in their super balance being maximised.  Once they retire, any income derived from the property will be tax-free to their SMSF, and no Capital Gains Tax will be payable when they sell.

Likewise in the pension phase, any income derived from their share portfolio within the SMSF in the form of dividends or capital gains from shares sold will be tax-free.

Now that is a significant saving!

As trustees, Melanie and Stuart know they don’t have to do it all on their own.  Engaging the services of APS Tax and APS Financial Planning to help with their administration, compliance and investment decisions gives them peace of mind every step of the way.  This ensures their strategy remains relevant to achieving their financial goals and they can take advantage of and explore new investments options like cryptocurrency and new emerging markets that are not easily obtained through an industry fund.

Upon retirement, Melanie and Stuart will have significantly increased their ability to maximise the funds available to them in superannuation.

Self-managed super funds with APS

Enjoy the benefits of an SMSF with the support of the APS team. We have a team of experts here to help you maximise your superannuation balance and reach all of your financial goals, now and in the future. Click here to learn more!