Preparing for your retirement is an essential part of your working life. Whether you are in your 50s or still in your early 20s, it is never too early to prepare. A popular way to prepare for retirement is self-managed super funds (SMSFs). Many find the freedom and flexibility of administering and managing your fund preferable to being part of a larger fund.
However, self-managed super funds are not as easy as some people expect. There is self-managed super fund tax rules, as well as reporting and auditing requirements. The ATO carefully monitors these conditions
The first process is to set up the SMSF. This procedure requires a lot of identification and administration, but it can be done by the person who wants to set up the fund. Alternatively, you can ask a professional, such as a superannuation accountant to help you out.
Once the self-managed super fund has been set-up, there are some annual compliance requirements. These include submitting SMSF audits reports to the ATO. They then check whether your fund is compliant about the investments you have been choosing.
These reports and audits are passed annually, but some more often that once a year. Also, there are self-managed super fund tax rules that apply as well.
Generally speaking, self-managed super funds must pay income tax. If it is a complying fund in which some incomes are computable, then a regular tax of 15 percent is applicable. On the other hand, the non-complying SMSF has a regular tax of 45 percent. But some instances also require a different rate of tax.
As for the complying SMSFs, the incomes that are computable and are subjected to 15% tax are the following:
* The net capital income
* Contributions that are computable
* The interests, rents, and dividends
The fees for the SMSF auditor, the supervisor, and other fees incurred can be deducted as expenses. Since an SMSF is managed all by yourselves, it means that any shortcomings or mistakes in investments done in your SMSF will be accounted as your mistake. Consequences will follow, and they are mostly in the form of fines.
The taxation office does not give any advice on investments, and so if you are looking for sound investments for your SMSF, contact a professional who can help you in both SMSF audits and at the same time advise you on the best investment strategies. Always hire the best SMSF experts and to be sure of their reputation. You can ask for referrals from friends who have SMSF funds or ask your financial advisor for a recommendation. You need to be very careful as there are many experts today who claim to be professional. Remember that the expert you choose will determine the success or failure of your fund and it impacts your future.