Super Funds

Self-Managed Super Funds Tax Rules

Getting ready for your retirement is a vital component of your working life. Whether you’re in your 50s or still in the early 20s, it is never too early to get ready. A well known method to prepare for retirement are self managed super funds (SMSFs). Many find the freedom and flexibility of administering and managing your own fund preferable to being part of a bigger fund.

However, self-managed super funds are not as simple as some individuals expect. You will find self managed super fund tax rules, as well as reporting and auditing requirements. These requirements are closely monitored by the Government and appropriate regulators.

The initial step is to set up the SMSF. This procedure takes a great deal of identification and administration, however it can be achieved by the person who would like to set up the fund. Alternatively you may ask a professional, such as a superannuation accountant to assist you.

When the self managed super fund has been set-up, there are a number of annual compliance requirements. Included in this are submitting reports and audits to the Government regulator. They then check whether your fund is compliant with regard to the investments you have been choosing.

These reports and audits are passed annually, however some more often that once per year. In addition, you will find self-managed super fund tax rules that apply as well.

Generally speaking, self-managed super funds must pay income tax. If it is a complying fund by which there are incomes that are computable, a regular tax of fifteen percent does apply. On the other hand, the non-complying SMSF includes a regular tax of 45 percent. However, some instances also need a different rate of tax. Types of these are:

• 45% is charged for non-arms length income

• 46.5% is charged for no-TFN (Tax Fine Number) contributions

• No tax is charged for any amounts that are identified as current pension income

• 46.5% is charged for contributions which are above the concessional cap.

As for the complying SMSFs, the incomes which are computable and are subjected to 15% tax would be the following:

• Contributions which are computable

• The net capital income

• The interests, rents and dividends

The fees for the SMSF auditor, the supervisor, along with other fees incurred could be deducted as expenses. Since an SMSF is managed all by yourselves, it means that any shortcomings or mistakes in investments carried out your self-managed super funds will be accounted as your mistake. Consequences will follow and they’re mostly by means of fines.

The taxation office doesn’t give any advice in investments, and thus should you be looking for sound investments on your SMSF, contact a professional SMSF auditing service. Please be aware that all numbers in this article were accurate during the time of writing but may have changed in the meantime and needs to be verified independently.