SHOULD SMSF HAVE IT ALL?
SHOULD SMSF HAVE IT ALL?I am trying to determine the benefits of having all my retirement funds in a self-managed super fund. Currently my wife and I have $750,000 in an SMSF and $150,000 outside in personal equities. If these equities remain outside the SMSF then the income earned will be liable for tax. The advantage is that I have personal control over this money. Money held in an SMSF is always subject to changes in regulations that the government is free to introduce. As I plan to retire this financial year I need to determine if there is an advantage transferring these personal equities into the SMSF. My wife has not worked for a number of years. T.J.You don't mention your age, which is important if planning to contribute to a super fund. Anyone under 65 can make contributions, whether working or not. If 65 or older, a person must meet the "40 hours within 30 consecutive days" work test. Don't forget, before transferring your shares from July next year on, your fund will need to buy the shares through the stock exchange.Assuming you are eligible, superannuation's pro is simply the tax benefit, and this includes the ability to reclaim unused franking credits from the ATO by a pension fund, which, as you would know, is untaxed and therefore has no use for franking credits.Among the cons of running an SMSF are increasing compliance requirements. The latest are a range of fines to be placed on trustees (and not the fund itself) from July next year. For example: the fine for a failure to retain trustee minutes for a minimum of 10 years is $1100, failure to notify the ATO of significant adverse events in the fund is $6600, and so forth.At present, the tax advantage outweighs the cons, provided you don't do anything silly with the fund and find yourself losing nearly half the fund or more in penalties and tax.An example of the dangers is shown in a recent case involving an SMSF belonging to a husband-and-wife couple, who divorced but then reunited, and who were the individual trustees and members of their fund.The husband withdrew $3.46 million from the SMSF - most of the money in the fund - without his wife's knowledge and transferred it to a foreign bank account in his name. Neither had met a condition of release at the time. The Tax Office made the fund non-complying and the wife was held liable as a co-trustee to pay tax of $1.58 million and penalties of $1.475 million.PENSION DILEMMAI am 77 and have $210,000 invested in an SMSF in my name in conservative mode. The June quarterly investment report showed I lost more than $2000 in investments for the past 12 months. Should I pull it out and place it in the bank in a term deposit? If I did this, would I pay tax on the interest earned? My husband is 80 and we receive a part pension. D.R.It sounds as though your SMSF has invested its money in a "conservative" managed fund.While the March to June quarterly report may have been 1 per cent negative, I suspect you will be having positive reports over the September and December 2012 quarters, so no, I wouldn't move it. Even if you wanted to move the money away from equities, I wouldn't move it out of your SMSF. For example, your SMSF can invest directly in bank term deposits, or you might find that your chosen managed fund also offers term deposits. For example, you can find CBA term deposits in the Colonial First State Wholesale fund and ANZ term deposits in the OnePath fund.If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Financial Ombudsman, 1300 780 808 pensions, 13 23 00.
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