Personal Finance,Self Managed Super Funds (SMSF),Tax

What Are The Tax Benefits Of An SMSF?

12 Oct , 2015  

Nikhil (Nik) Sreedhar
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Nikhil (Nik) Sreedhar

Founder at ProAdviser
Nikhil's dream job is to be an exotic car salesman. His favourite colour is orange and it shows as he is the 23 year old entrepreneur behind ProAdviser. You should follow him, he gets lonely.
Nikhil (Nik) Sreedhar
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There are some tax benefits to be realised from a self-managed superfund (SMSF) but it can be a little tricky to pull this off.  Still, it is possible to gain some tax advantages with your SMSF.  Let’s take a look at how.

There are ways to set up your SMSF to give you tax credits, but it is difficult.  It can also be a gamble, because you have to be able to time everything correctly in order to realise a profit.  Perhaps an explanation of investment taxes will help, particularly when it comes to SMSFs.

Like with personal taxes, income is taxable, and when it comes to SMSFs, both interest and dividend income are factored in.  This is called your assessable income.

You can deduct your fees regarding the fund including any brokerage fees, legal fees, accounting costs, and administration costs.  Once you have totalled these costs, the next step is to deduct them from your assessable income.  The tax rate is 15% and is assessed on the reduced amount.

Now, take that amount and subtract from it any tax credits you might be eligible for including foreign tax credits or imputation credits.  You cannot be taxed twice, and you have already paid tax through the public company at a higher rate – 30%.

If you only buy fully franked shares in your SMSF, you can realise a refund. The 30% tax rate already paid on some shares means for shares on which you pay less, you are given a refund of the difference.

If that sounds confusing, don’t worry.  It can be very confusing.  There are other considerations to factor in, so it could really pay you in the long run to consult an investment expert to help you navigate the rules and regulations. You will also want to be sure your tax preparer or accountant understands SMSFs and the tax rules that apply to them.

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