DIY Superannuation Advantages

Advantages include:

• You have control of your investments and make your decisions for your investments. You can tailor an investment strategy specific to your financial needs. Only you can sign the Fund’s cheques and make investments.
• Simple, inexpensive structure, e.g. normally husband and wife are trustees of the superannuation fund and no need of a corporate (Pty Ltd) trustee.
• Lower fees using Crea & Co compared to the fees charged by comparable institutional superannuation funds.  This depends upon the type of superannuation fund. Avoid the hidden charges and fees of the large retail funds. As the level of assets increases within a DIY fund, then costs as a percentage of the assets in the fund reduce. Investors who plan to accumulate over $200,000 in assets presently with smaller holdings over the next few years may also find that setting up a DIY fund is more cost effective.
• A DIY fund, run by yourselves, is normally more flexible for investments than retail/commercial funds, e.g. Acquisition of property and other permitted investments, including shares, bonds, mortgaged investments , private equity, mortgages and fixed interest can be made by your DIY Fund.
• Investment flexibility means you can invest in a large variety of financial products that are not available via traditional retail funds.
• With your DIY Super Fund there are no fees charged on your or your employer’s regular superannuation contributions.
• Asset retention Within a DIY Fund you may change investment managers (if you have one) without having to sell your investments which incurs capital gains tax.
• Estate planning. Your Fund has an indefinite life and can be used to provide benefits from generation to generation. How you take care of your family after your death, is usually of high concern. Depending on your wishes you may have children allocated and income stream or a lump sum. Binding death nominations are often used especially when there are children from different marriages and or partners to consider. Adding life insurance to your Fund can give your family the care you wish in the event of your death.
• Family wealth accumulation. Your DIY Super Fund with careful planning allows multi generations to accumulate their savings and to allow for the death of a member and desired income in retirement. The Fund can be structured to meet the needs of the individual members of the Fund. This allows the three stages in the lifetime of the individual members to be considered.

Accumulation Super stage - Contribution to the Fund and income accumulation.

Pension Stage - Drawing down from the Fund

Estate planning (Family Succession) the passing on of the individual members of the Funds assets to the next generation.

The Fund can continue indefinitely.

• Assets in your superannuation may be protected in the event of bankruptcy. This can be of particular interest to small business owners.
• Superannuation Fund assets and income do not count for Centrelink purposes until Aged or Service Pension age. A husband and wife may receive a full Centrelink age pension and Spouse pension, when one is pension age, while the younger partner has all assets in a Super Fund.  However, when the younger partner reaches age pension age, the assets count towards total assets and the total  assets may then mean the Centrelink pensions cease all together. Certain strategies may be available to see that the older persons assets including Superannuation are invested in Superannuation.
• Your DIY Superannuation Fund becomes your DIY Pension Fund so there are no legal costs at the pension commencement, unless your Trust deed does not properly cover the pensions you commence from your DIY Pension Fund.
• THERE IS NO REQUIREMENT TO PAY OUT BENEFITS OR TO COMMENCE A PENSION FROM YOUR DIY FUND WHEN YOU RETIRE
• Taxation advantages include:

- The Government offers a number of tax concessions to encourage retirement savings.

- Low rate of tax of 15% on income of the Superannuation Fund can be reduced to NIL with franking credits and may even result in a tax refund.

Comparing being taxed outside of super:

If earning 8% on $100,000=                   $80,000

less 30% tax                                           $24,000

net                                                          $56,000

return on investment                                5.6%

earnings                                                  $80,000

as if 47% tax                                           $37,600

net                                                          $42,400

return on investment                                 4.24%

If in super fund:

earnings                                                 $80,000

tax 15%                                                 $12,000

net                                                         $68,000

return on investment                               6.8%

Over a longer time period the differences after tax returns will make a large difference to the value of the investment.

- Concessional (Deductible) contributions to superannuation funds are taxed at only 15% which is paid by the fund.

- Capital gains tax at 10% (Where assets held more than 12 months).

- Franking Credit Benefits from dividends can mean tax refunds in your super fund.

- There is no tax on non-concessional (undeductible) personal contributions made to superannuation funds.

- Non-concessional (undeducted) personal contributions are limited to $150,000 per person per year, but with a $450,000 three year average for those nearing retirement and who are aged over 50.

             Example 1                            Example 2

2007     $150,000                             $450,000

2008     $150,000                             -

2009     $150,000                             -

2010     $150,000                             $150,000

 

• Concessional (deductible) contributions by employers or individuals including self employed and non working persons will be $50,000 per year regardless of age.  However those aged over 50 have a $100,000 phase in per year until 2012.
• The  DIY Fund can accept multiple employer and personal contributions.
• A work test is required for those over 65 for concessional (deductible) contributions and non-concessional personal until age 75.
• In specie contributions, listed securities (shares managed Funds etc), and business real estate may be contributed directly to the fund if you wish. These may be concessional (deductible) and or non-concessional personal (undeductible).
• Lump sum payments on retirement are taxed at 55 years until 60 for taxed monies.

• Any payment from super or pension funds will not be taxed providing retired and aged over 60.  However, if an untaxed fund (mainly government funds) pensions taxed at marginal rateds with a 10% tax offset.  Lump sum payments from untaxed funds are treated differently for those aged over 60.

Co Contributions can be received from Government of up to $1500 for non concessional personal (undeducted) super contributions of $1000 for qualifying persons, being:-

- Earning less than $28000 a year (phased out from $28000 to $58000)

- Employed full time, part time or on a casual basis

- Entitled to receive super contributions from your employer

- Under 71 years

- A permanent resident of Australia

-Wage income or self employment income must be at least 10% of total income

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