Self Managed Super Fund
What is an Self Managed Super Fund (SMSF) and is it right for you?
A Self Managed Super Fund (SMSF) is a vehicle for you to hold investments for your retirement. It is for those people who want more control over their investments regarding a possible mix of cash, shares and property that YOU select to provide for your retirement as opposed to using a Public offer Fund which may offer WRAP accounts in which the Investments are mostly guided by the Financial Institution you choose to manage your retirement.
Why do people choose to investment in a Self Managed Super Fund
Many choose to operate an SMSF to purchase property of their choice. This can be an investment residential property or a business premises they operate their business from. This cannot be done through a Public Offer Fund.
You can see how the investments perform each year through a market value appraisal of property, shares and other investments.
Buying an investment property in Self Managed Super Fund
Many like the idea of buying a property in an SMSF. This can be a residential investment property, commercial property or your business property. We are specialists in this area and in fact have done it ourselves.
Borrowing in an SMSF
Would you like to buy a property in an SMSF but don’t have enough cash? You might be able to borrow to purchase that investment or your business property with the opportunity to borrow funds from a bank.
There are quite a few rules surrounding this investment type, so you will require a specialised firm such as BWD to guide you through the maze of law. An experienced advisor can be very costly!
Binding Death Benefit Nominations
When a Self Managed Super Fund (SMSF) member dies, the SMSF pays a death benefit to a dependant or other beneficiary of the deceased. This should be done as soon as possible after the member’s death.
As the SMSF is controlled by the trustee, you will need to complete a Binding Death Benefit Nomination (BDBN) when establishing the fund. You can select either a Binding, Non-Binding or Non-Lapsing death benefit. If you did not make a nomination or it is a non-binding nomination, the trustee of the fund may:
– use their discretion to decide which dependant(s) the death benefit is paid to.
– make a payment to the deceased’s estate for distribution according to the instructions in the deceased’s will.
If the recipient is a dependant of the deceased, the death benefit can be paid as a lump sum or income stream. The income stream can be new or a continuation of an existing income stream.
If the recipient is not a dependant of the deceased, the death benefit must be paid as a lump sum. Children over the age of 25 (other than those with a permanent disability) cannot receive super death benefits as an income stream. And, if they do receive a death benefit pension from an earlier age, they’ll typically need to cash it as a lump sum by the time they turn 25.
The definition of a dependant is slightly different for:
– who you can pay a death benefit to (superannuation law)
– how the death benefit will be taxed (taxation law).
Under superannuation law, a death benefit dependant includes:
– the deceased’s spouse
– a child of the deceased
– in an interdependency relationship with the deceased – this is a close personal relationship between two people who live together, where one or both provides for the financial, domestic and personal support of the other.
Under taxation law, a death benefit dependant includes:
– the deceased’s spouse or de facto spouse
– the deceased’s former spouse or de facto spouse
– a child of the deceased under 18 years old
– a person financially dependent on the deceased
– a person in an interdependency relationship with the deceased
BWD SMSF Specialists
BWD are SMSF specialists! Please give us a call regarding your interest in establishing an SMSF and we will be happy to discuss your circumstances.
Generally, an SMSF will costs $600 to $1,500 to establish.
Ongoing costs include the preparation of Financial Statements and Tax Returns $2,000 to $3,000. And an audit of those Financial Statements of $400 to $500.
Considering a Public Fund could cost 1% of assets there could be quite a saving ($500,000 x 1% = $5,000). Do note however there are low cost Superannuation Funds available.