There are many benefits to having a Self-Managed Super Fund (SMSF). The ability for trustees to invest mandatory super contributions as they see fit, proactively grow wealth, and support themselves in a comfortable retirement are chief amongst them. However, thanks to their status as separate legal entities and their unique taxation arrangements, Self-Managed Super Funds can unlock powerful Tax Planning options.
For example, a farmer who owns his/her own land. If held by the farming business, this land is financially speaking, a lazy asset, demanding no cash inputs and providing no cash outputs. However, if transferred to the farmer’s Self-Managed Super Fund, the land can become a very active asset, demanding market value rent from the farming business which uses it and providing a steady stream of capital into the Self-Managed Super Fund. It may be complex, but such an arrangement, in essence, allows the farmer to make payments into their retirement savings which are 100% tax deductible by their farming business.
Furthermore, once the farmer reaches retirement age and starts receiving a pension from his/her Self-Managed Super Fund, they have access to a Tax Planning option affectionately known as the ‘rent pension roundabout’. In this arrangement, the farmer would be paid a pension by his/her Fund which is less than or equal to the rent their business pays it, allowing them, in essence, to pay themselves a pension which is 100% tax deductible by their business.
The trade-off for the power of these Tax Planning options is their complexity. It takes specialised knowledge to ensure such complex arrangements are implemented correctly, work effectively and satisfy all aspects of self-managed super and taxation regulation. Thanks to our size, we have a specialised Self-Managed Superannuation Fund division with professionals looking after your Fund, ensuring the best outcomes are achieved.