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Advantages of an SMSF

For most Australians, superannuation is one of their most important assets, usually only coming second to the family home. Superannuation is a great way to plan for your retirement, offering you a lot of tax breaks and ensuring that you are putting money aside for the future you want.

However, it can be unsettling when you do not know exactly where and how this crucial asset is being invested. It is natural to want to have more control over your super, and to understand exactly where your money is invested.

Unfortunately, many industry, retail and corporate funds can be very vague in letting you know where your money is, for example simply saying ‘Australian shares’. Additionally, the choice of risk categories offered to members are often not specific enough to fully reflect your individual investment needs.

Starting an SMSF is not just about choice, but also control. You can create a more sophisticated investment strategy that is perfectly aligned with your risk appetite, ensuring that your money is doing precisely what you want it to do.

Recently, it has become possible for SMSFs to borrow money in order to purchase property. This means that when members reach pension age, they will be able to take control of the property, something that is not possible in other types of funds.

SMSF members also have a greater degree of control over the tax liabilities of their superannuation, and there are many effective tax minimisation strategies available to SMSFs.

There are also some advantages that are specific to business owners. Under some specific circumstances, your SMSF can even  purchase your business premises, and the business can, in turn, lease the property from the SMSF.

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News

Tax on super death benefits for dependants vs non-dependants

July 9, 2020

A super death benefit is the super paid after a person’s death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.

Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:

Dependants will not have to pay tax on the tax-free component of their super in the event that they:

However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:

Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.

Super death benefit payments are subject to tax when:

Non-dependants must calculate how much money in the super account is a:

The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).