Introduction to SMSF strategies

Strategies are formed to suit your particular situation, they center around reducing costs increasing cash flow, increasing income. Strategies evolve from advisers understanding of changes to the law and how the advisers can use this to serve their clients interests better. With the internet information on topics can be readily accessed however the accuracy, completeness, and currency of the information should always be questioned, and our website is no different. Laws change frequently and as such we always urge readers to take comfort from your increase understanding of what you read, but always seek advice before implementing a strategy to ensure accuracy, completeness, and currency of the law in respect to the strategy.

Also, Remember where you are uncertain on any aspect of the law in relation to a proposed transaction you can seek a private ruling from the ATO, see the <ATO-Link>.

Current Rules – As is the case with revised laws, it takes some time for the laws to be widely understood and then practically applied to client situations by the vast majority of advisers. Some of the more important changes to the law that have been the source of these strategies include the tax exemption on income in pension phase, the caps on contributions, removal of compulsory cashing of benefits, and the new standards for pensions: eg the proportionate rule and minimum and maximum amounts to mention a couple. 

New Rules – New laws are continually introduced and the sweeping changes often stem from reviews, recent reviews are the Cooper, Henry, and Harmer Reviews. For those wishing to keep ahead of proposed legislative changes click here for a place to start. 

Don’t fall foul of the rules – Ensure ‘cutting edge’ strategies recommended by advisers do not fall foul of the ‘tax exploitation scheme provisions’ that are schemes aimed at avoidance or evasions. Ensure that any strategy considers APRA and ATO advice, guidelines and rulings (public, private, product, or oral). 

Can we summaries the strategies – Whilst strategies are formed to suit a clients specific needs, it is possible to provide some broad outlines that are common to many strategies. The purpose of this section is to provide you with some ideas to be able to kick start you into action in sorting out your own strategies in a plan with your own advisor, if you don’t have an advisor then contact “Audit of SMSF” to possibly recommend an adviser near you or an adviser that may be suited to your needs. 

To start off, we have provided below a table that shows a person at 45 with different starting super balances and on different incomes. 

The table then assumes a 8% income & growth rate less 4% inflation so a inflation adjusted income/growth rate of 4% PLUS 9% super contributions on the different salary levels shown. 

It then assumes you retire at 60 and assumes you begin drawing from your super as a pension with a monthly withdrawal from $3,000 to $20,000 per month. 

Please note the assumptions below the table regarding tax etc. 

Interestingly, from the 11 scenarios, 8 run out of money within 8 years at 68! It is for these reasons, that many people are underfunded for there retirement needs, that super has become an important place for increasing your savings due to the favourable tax treatment of savings in the superannuation system. Assumptions:

• Tax considerations have not been taken into account.
• No Super expenses have been taken into account such as life insurance, super administration fees, etc.

 
So in order to avoid not providing enough for your retirement we have provided some ideas ‘super plans for the self employed’ ‘super plans for an employee’ to kick start you into action in sorting out your own strategies in a plan with your own advisor..