Important SMSF Strategies

What is an SMSF?
A Self-Managed Super Fund or a superannuation is a pension product developed by companies with an intention of benefiting its employees. One striking aspect of an SMSF is that it is developed or provided by the employer, but the control is left to the employees.

How does an SMSF work?
Members (employers, employees, and the self-employed) make contributions over a long period. These contributions are held in what is called a superannuation fund. The funds are intended to assist the elderly (members) after they retire. The funds can be invested in the economy to further boost the members benefits.

A member is entitled to their share of the fund in either one or a combination of the following cases:

  • When a member retires
  • In case a member is incapacitated, or
  • A member dies, in which case the benefits are transferred to a family member.

As an incentive, the government usually reduces the taxes deducted from superannuation funds. This is nonetheless subject to a number of conditions outlined by the authorities concerned. This has popularized SMSFs and more, and more companies are rolling it out for their employees.

What Distinguishes an SMSF Fund From other Funds?
For a fund to qualify as a superannuation fund, the following requirements have to be met.

  • The members should not exceed five. This makes the fund easy to manage.
  • Each member of the fund should also be a trustee.
  • Members should only be the individual trustees of the fund.
  • All members are equal, and none has authority over the others. Decisions are therefore made through a unanimous agreement among all the members.
  • Trustees or members are not liable for any payments. They can only lay claim to the benefits entitled to them.

What strategies can be employed to Effectively Manage an SMSF?
The following 5 SMSF strategies are intended to guide any company or individual that seeks to benefit from such a program. These 5 SMSF strategies will only be beneficial once you have understood adequately what and how superannuation funds work. Here are the strategies:

1) Build a modern self-managed super fund.

The fund should be founded on 21st-century principles such as:

  • Reforms should be simple to implement. This allows the funds to be sustained indefinitely.
  • The income scheme should be run in a roll back manner.
  • Other funds should be saved in other accounts to aid in emerging needs.
  • Take advantage of the tax-free superannuation fund to save for longer.

2) Look for an Investment Strategy

At the time of retiring, each member will have two accounts. The first one is the regular operating account that sustains your daily lifestyle. The other one is the SMSF account that contains your accumulated savings. You can use the funds in your SMSF account to carry out various investments that will further add to your benefits.

Efforts should be undertaken to search for valid investment opportunities for members funds. The money shouldn’t be left lying around.

3) Maximization of members Contributions.

The amount of money held in any SMSF fund is subjected to little or no tax at all. To reap the full benefits, members should strive to maximize their contributions. Other exemptions include personal injury and CGT.

Superannuation funds have earned members a lot of money within a very short time. The organizers of an SMSF fund should greatly encourage savings.

4) SMSFs Should Contribute to Deductions

Members of a self-managed super fund are legible for deductions if:

  • They are not currently employed.
  • Members salary is less that 10% of the assessable income.
  • A member is below the age of 65 or 70 depending on the age bracket applicable in the country.
  • These members should be exempted from any deductions. The success of a superannuation fund depends on its powers to protect the members. Members who fall out of this category should be subjected to the full taxation imposed.

5) Incorporate Children and Spouses

A good strategy should be able to bring aboard the members family. This ensures continuity in the family. In case one of your kids dies or is incapacitated, their children will be financially catered for. The program does not secure your immediate family alone. It also extends to any other relatives mentioned to be part of the beneficiaries.

The 5 SMSF strategies highlighted above have led to the success of a number of organizations that dared to dream. There is no regretting when you become a member of a self-managed super fund.