How super are you? – Size does matter
Self managed superannuation funds (SMSF) popularity continues with in excess of 540,000 funds, 1,024,000 members and $544 billion in assets. And it’s not only baby boomers and retirees; a significant number of people under age 45 are starting up SMSF’s. The popularity is easy to understand due to:
- Low 15% taxation rate on earnings;
- Even lower potential 10% tax rate on capital gains;
- No tax on earnings when the fund is paying pensions;
- Control over your own funds; and
- Ability to borrow in the SMSF environment in recent years.
The proliferation of SMSF’s and low taxation has prompted the ATO to increase their compliance activities. This, along with the ever changing regulatory environment, makes it critical to get the right advice up front.
Some of the more recent changes implemented include:
- “Market value” reporting requirements & valuation guidelines
- “Division 293 Tax” will increase contribution tax from 15% to 30% for high income earners with ‘adjusted taxable income’ in excess of $300,000.
- Concessional contribution caps have increased for the 2014/15 year to between $30,000 and $35,000 depending on your age. The non-concessional contribution cap has increased to $180,000.
There appears to be daily speculation by various commentators about the future of Limited Recourse Borrowing Arrangements. To date the Government has not proposed any changes so the current borrowing rules apply. Just because your SMSF can now borrow it does not necessarily mean that this may be the best option for you. In our experience there is no one correct solution and each client’s circumstances need to be considered.
But beware. SMSF’s may not be appropriate for everybody. Establishment costs, plus on-going costs of maintenance, taxation and audit compliance mean a fund balance of around $300,000 is generally considered as a minimum sensible requirement to establish a SMSF (or the ability to fund large non concessional contributions to get the fund going).
Fund members also need to consider the ongoing SIS Act obligations which must strictly be adhered to, so that the SMSF maintains its compliance status and the all important low income tax concessions. Getting the right advice should ensure that these obligations are met.
Whether it be the early set up stage, contribution stage or gaining access to your benefits at retirement; we are here to assist with all your SMSF requirements.