Tax Benefits of Self-Managed Superannuation Funds

If you have started planning your retirement or at least thought of how to increase accumulated pension money, you have certainly come across self-managed superannuation funds. Relatively new, these funds are an attractive option to invest your money in as they offer better benefits compared to other standard pension funds. They are very easy to organize but there are certain conditions that you must meet like initial fund assets, trustee and operating costs for the future so it is not a ”piece of cake” job. This option looks attractive to potential members because of the SMSF tax benefits it holds. However, these benefits depend on what kind of assets you are gonna invest fund money in as SMSF tax rates are not same for property investment and stock investment.

If you choose to invest in property through SMSFs, you will be overwhelmed with the tax benefits you’ll gain. For instance, if you buy a house through the fund, you instantly enter a different tax class where taxes are 3 percent lower than usual. And this is not all – if you own the property for at least 12 months you will be eligible to refund all tax money you have paid. Beside very good SMSF tax returns, residential property is, generally speaking, a reliable alternative to invest money in. However, you should try to monetize fund money from other sources just to diversify the risk in your investment portfolio.

Same goes with stock investments. Once you enter the stock market and invest in stocks, you and other fund members become financially attractive and you get the benefits of paying lower dividend taxes compared to other investors. Hence, a normal stock purchase comes with 30% tax rate and for SMSF investors the tax rate is lowered to 15% which means that the other 15% are refundable.

Capital gains of a fund at the end of a year are just a number on a paper. The real value comes when all tax deductions are made and money goes straight to your bank account. Most members forget about this and panic once they see their fund statement before taxation procedure ends. Moreover, if the assets on which capital gains were made, are owned for more than 12 months, a third of the total tax rate (normally 15%) is deducted. Thus, this is another undocumented income that fund members don’t plan in their personal SMSF tax calculations.