Preparing for retirement is an integral part of your professional life. Whether you are in your fifties or still in your early twenties, it's never too early to prepare for it. Self-managed super funds (SMSF) are a popular method for preparing for retirement. Many felt the freedom and flexibility in administering and managing their funds was preferable to being part of a larger fund.
However, self-managed super funds are not as easy as some people think. There are self-managed super funds tax rules, as well as reporting and auditing requirements. These requirements are closely monitored by the government and relevant regulatory agencies.
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The first step is to set up SMSF. This process requires a lot of identification and administration but can be done by anyone who wants to set up funds. As an alternative, you can contact a professional, eg. superannuation accountant for help.
In general, self-managed super funds have to pay income tax. If it is a fund with computable income, a regular tax of 15 percent is imposed.
On the other hand, non-complying SMSF has a fixed tax of 45 percent. However, in some cases, different tax rates are required. The example is:
• 45% counts towards unarmed income.
• 46.5% calculated for contributions without TFN (tax penalties).
• No tax is charged on the amount recorded as current pension income.
• 46.5% will be charged for contributions over the concession amount.