2022-23 Federal Budget Update – A quiet night for SMSFs

This year’s Federal Budget cost-of-living relief, job growth and women’s security. The key measures that you should be aware of as an SMSF trustee are outlined below. Should you wish to discuss how these may impact your personal circumstances or retirement plans please contact me to arrange a time to chat.

Extension of the temporary reduction in superannuation minimum draw down rates

The Government has extended the 50 per cent reduction of the superannuation minimum drawdown requirements for account-based pensions and similar products for a further year to 30 June 2023. The minimum drawdown requirements determine the minimum amount of a pension that a retiree must draw from their superannuation in order to qualify for tax concessions.

Given ongoing volatility, this change will allow retirees to avoid selling assets to satisfy the minimum drawdown requirements.

Digitalising trust income reporting and processing

The Government will digitalise trust and beneficiary income reporting and processing, by allowing all trust tax return filers the option to lodge income tax returns electronically, increasing pre-filling and automating ATO assurance processes. The measure will commence from 1 July 2024, subject to advice from software providers about their capacity to deliver.

Trust income reporting and assessment calculation processes have not been automated to the same extent as individual or company tax returns, resulting in longer processing times and limited pre-filling opportunities. This measure will reduce the compliance burdens on SMSF trustees (taxpayers), reduce processing times and enhance ATO processes. The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications.

 

Understanding self-managed super fund performance

New research released

When used in the right circumstances a self-managed super fund (SMSF) can provide important benefits for individuals looking for greater levels of investment flexibility and control over how their super savings are invested.

New research released by the University of Adelaide shows an SMSF may be a suitable option for individuals with lower superannuation balances than previously thought.

In its report, titled “Understanding self-managed super fund performance” the University of Adelaide used data from over 318,000 SMSFs between 1 July 2017 and 30 June 2019, to identify the minimum amount of capital required for an SMSF to achieve comparable investment returns with much larger funds.

(more…)

A Wonderful Write up Regarding our new 2021 Awards

Boutique Accounting Business of the Year 2021 – Eastern Australia & Client Service Excellence Award 2021

Accredited with two awards that are both truly representative of the culture and values of the business, Foxton Financial is an accounting firm like no other. Working tirelessly to ensure clients are not only satisfied but are thoroughly impressed with the exemplary service, the firm has nurtured an almost peerless reputation. With all of this in mind, we took a closer look at the history, ethos and future of Foxton Financial to find out more. (more…)

Setting up an SMSF – What do you need to consider?

Setting up an SMSF can be complicated.  Not getting it right can materially affect your financial situation and retirement plans.

The first question you need to be sure about is whether an SMSF is the right fit.  Seeking specialised financial advice can help you determine this answer. Some considerations include:

Low balances

You must ensure you have an appropriate superannuation balance before considering an SMSF. While a low balance can be a red flag, it is not always a barrier to entry.  Establishing an SMSF with a small balance may not be in your best interests. This is because SMSFs tend to be more cost-efficient with larger balances. Therefore, before rolling over your superannuation balance to an SMSF, you should establish and justify that by doing so you are likely to end up in a better position in retirement.

Motivation

You must also understand your motivation for establishing an SMSF. The most common motivation SMSF trustees indicate is control. Control of an SMSF allows individuals to have a wide range of investment choice, flexibility and engagement with their superannuation. However, superannuation law is complex and you need to ensure your ambitions are allowed under the law and will be able to achieved in an SMSF.

Costs and time

SMSFs incur a wide range of costs in establishment and the day to day running of the fund. Ensure you are across the estimated establishment, accounting and audit costs that will be incurred by your SMSF. Speak with your advisers so you are across all other incidental costs, which unlike large super funds generally occur with fixed rates rather than as a proportion of your balance.

SMSFs also require dedicated attention from trustees which will take time out of your daily life to manage. Understanding from the outset your legislated responsibilities and obligations before establishing an SMSF is important.

Establishment process

Once you have decided that an SMSF is right for you, the process of establishing the fund can commence. A Specialist SMSF adviser is the best person to help you with this process which generally involves choosing a trustee structure, selecting a trust deed, completing the ATO registration,  opening a unique fund bank account, getting an electronic service address and arranging for rollovers to the fund to occur.

Investment Strategy and Insurance

Upon establishment you must also create an investment strategy which must be regularly reviewed.

Your investment strategy should be in writing and must consider:

•             Diversification (investing in a range of assets and asset classes).

•             The liquidity of the fund’s assets (how easily they can be converted to cash to meet fund expenses).

•             The fund’s ability to pay benefits (when members retire) and other costs it incurs.

•             The members’ needs and circumstances (for example, their age and retirement needs).

•             Whether to hold insurance in your SMSF.

Property investment

It is also common for SMSF trustees to be motivated by investing in property when establishing an SMSF. You should be sure that any investment in property, particularly when gearing is involved, is appropriate for your circumstances. Holding properties in an SMSF can also require some complex structures to ensure the law is being followed and specialist advice may be needed before making an investment choice. A lack of diversification, low balances and inappropriate property investments can have a detrimental impact on your retirement savings.

How can we help?

If you are considering an SMSF, please feel free to give me a call to arrange a time to meet so that we can discuss your particular requirements and circumstances in more detail.