Discover The Tax Benefits Associated With An Smsf

In todays difficult economic climate, people are turning to a self managed super

fund to ensure they are managing and securing their retirement nest egg. The benefits of an SMSF are wide and varied, but one of the key attractions with this particular type of superannuation plan is the tax benefits that can be gained.

People often dont realise the positive financial opportunities that are available when it comes to salary sacrificing. If you do arrange with your employer to make additional contributions to your self managed super fund, you will only be taxed 15% on them. This is because the money isnt being allocated to your personal name or bank account which attracts a far higher tax rate. If you sit within the top marginal tax bracket of 46.50% you can potentially save up to 31.50% on each dollar you salary sacrifice into your SMSF. Once you start to add up these savings, youll soon realise the thousands of dollars difference it can make to your super fund.

In most cases, experts recommend that you earn above $35,000 per year (which puts you in the 30% tax bracket) before choosing to salary sacrifice. Should this be your situation, your main concern when deciding whether to salary sacrifice or not is the reality that the money being contributed into your super is inaccessible until you retire. Therefore, it is important to only sacrifice as much of your disposable income as you can afford.

More often than not, people nearing their retirement will ramp up their salary sacrificing as they know they will have access to it in a matter of years as opposed to a matter of decades. Although you wont be getting as much in your pay for a few years, the tax rate is lowered and when it comes time to leave work, the savings that can be had are exceptional.

There is a great deal of money to be saved by utilising salary sacrificing as a strategy for you self managed super fund. While it may not be your main focus in the initial stages of your career and retirement plan, there is plenty of scope to make this tax benefit work hard for you in the last 5 to 10 years of your working life. The key to leveraging this is to ensure that you always are aware of how much you are contributing, what your retirement fund balance is annually and what difference it will make by adding certain amounts over the life of the fund.

The results will no doubt surprise and delight you.

by: Kathy Richards

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