A self managed super fund (SMSF) is a superannuation trust structure that provides benefits to its members upon retirement. The main difference between SMSFs and other super funds is that SMSF members are also the trustees of the fund.
The advantages of establishing a family SMSF are:
- Tax savings - 0% on the first $1.6 million of a member’s super balance in pension phase, 10% on any capital gains where the asset was owned for more than 12 months and 15% on any other taxable income.
- Can combine the super fund balances of up to 4 members to make larger investments than a single member could finance on their own (like a farm, commercial property, residential property, etc).
- A family’s super contributions are consolidated and kept together (so no multiple super accounts or lost super!).
- Owning shares in a SMSF is very tax effective as any fully franked dividends will have attached franking credits giving the SMSF a credit for the 30% tax paid by the company. As the standard super fund tax rate is 15%, the excess franking credits will be available to reduce the tax payable on other super fund income, or be refunded.
- Can purchase the business premises or farm (and rent it back to the operating business for arms-length rental income).
- Can use non-recourse borrowings to finance the acquisition of larger investments.
- Can invest in non-controlled entities that operate businesses and are leveraged.
- Great asset protection (even if the member goes bankrupt the member's superannuation balance is still protected from creditors).