When Does an SMSF Stop Paying Income Tax on its Investment Income?

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SMSF Stop

One of the main advantages of starting a Self Managed Super Fund (SMSF) is that the funds will not have to pay income tax on some or all of its investment income.

For an SMSF, investment income is not limited to interest, dividends, rents, and trust distribution amounts. It also includes capital gains. Capital gain occurs when the fund sells investments at higher than the purchase price.

In fact, some funds pay no tax at all. By receiving dividends from investments in shares, which include amounts known as “franking credits”, they receive a tax refund every year.

How Actuaries Help Calculate Tax Savings & Retirement Phase Proportions

To be eligible for such perks, many SMSFs need help from an actuary for a special calculation, which includes working out the actual proportion of the fund that was paying retirement phase pension throughout the year. For example, if the proportion is 40%, then the fund does not have to pay tax on 40% of the investment income. It is described as a fund’s “actuarial percentage”, which is mentioned in the “actuarial certificate”, provided by an actuary.

How Can  Smart Financial Advisory Help?

Our experts help you access a broader range of investments through SMSF, including shares, term deposits, managed funds, properties, collectibles and more. We provide end-to-end services to our clients, from the establishment of SMSF and investment strategy planning and advice to investment implementation and investment review and opportunities.

We will work out whether you need an actuarial certificate each year, and if you do, we will help you get an accurate one. When preparing your fund’s tax return, we will use it to determine how much of your investment income is exempt from tax.

You can count on us for effective continual management and maintenance of your SMSF. We will provide tailored solutions Based on your financial situation and goals. Contact us today.

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