SMSF have many clear benefits such as greater control and visibility, tax strategies and the ability to pool super assets with a partner of family member. However, knowing when it is the right time to start a SMSF is less clear.
Your own financial circumstances are crucial for the timing of starting a SMSF. You need to ask yourself questions like ‘do I have sufficient funds to start a SMSF?’ or ‘should I pay off my mortgage first?
The big question is ‘what is the minimum amount needed to start a SMSF?’ A large amount of money is needed in the fund to make set-up and yearly running costs(accounting, audits and annual lodgement fees).
The rule of thumb is that between $100,000 and $200,000 is needed. However, less than this amount can be okay if you plan on making regular contributions in the future.
Paying off the mortgage is an important financial goal of many Australians. Benefits of prioritising mortgage payments include less accumulated interest and financial security. On the other hand, contributing to your super can save you tax and is helping saving for the future.
You can salary sacrifice into your super so that you boost your retirement savings and save on tax. You can pay extra cash into your super from your pre-tax salary at the concessional 15% rate of tax—up to a limit (or cap) of $30,000 for 2015/16 (or $35,000 if you’re 49 or over).
There are other things you should to take into account before you start your SMSF. According to the Australian Securities and Investments Commission, you will typically need to have plenty of time to manage the fund, financial experience and skills or professional advice. You can have separate insurance policies with your SMSF including income protection and total and permanent disability cover.
If you have any queries relating to SMSF, please don’t hesitate to get in touch with the team here at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
