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Why Making an SMSF Succession Plan is Important

Financial Advice
1. Longevity: Are You Prepared?
2. Client Success Stories of 2020
3. Client Success Stories of 2020: Part 2
4. Sick of setting goals that end up gathering dust?
5. 5 Myths about Seeking Financial Advice You Need to Know
6. Factors to Consider for Your Financial Retirement Plan
7. Preparing for Retirement: Five Things to Think About
8. Why Making an SMSF Succession Plan is Important

New legislation has allowed for a maximum of six members in an SMSF, opening the possibility of more easy transfers of superannuation to the next generation. However, before you begin to add your children and their spouses to your fund, it’s essential to create an explicit SMSF succession plan to avoid causing problems.

A succession plan outlines who will control your SMSF after you die or lose mental capacity. With the right planning, a smooth succession can be achieved with administrative ease, minimal compliance hassles, tax effectiveness and certainty upon the death of a member.

Why make an SMSF succession plan?

Having a succession plan also helps avoids administrative and compliance problems with the SMSF following your death. It can reduce the prospect of reporting and compliance obligations being overlooked. This prevents an SMSF trustee from receiving a fine and possible jail time.

Good succession planning also provides benefit payment certainty and increases the ability to make these payments in a tax effective manner.

Age allowed to transfer to an SMSF

A child under 18 years of age can be a member of the SMSF but can’t be a trustee or director of a trustee company until they are at least that age. While the child is under the age of 18, it’s the child’s parents, guardian or their legal personal representative who is the trustee in the child’s place.

Developing an effective succession plan

It is important to develop an effective SMSF succession plan to allow you to take advantage of the benefits of an SMSF and enable the transfer of the superannuation fund to the next generation. At the same time, it will prevent you from being penalised for breaking any superannuation legislation.

Appointing a power of attorney

One of the most important things you can do to ensure the smooth transfer of the fund is to appoint a power of attorney. This is an experienced superannuation trustee who can take control of the fund in the event of any unexpected circumstances.

However, regardless of whether you appoint a power of attorney, you should always take advantage of the services of an adviser. This is because not only will they help you to create an effective SMSF succession plan, but they will also help you to implement it. This will allow you to keep the fund under control, regardless of the circumstances.

Tax and your SMSF

Making a succession plan for an SMSF will involve dealing with some important facets. You will need to consider the tax implications of changing trustees. You will also need to deal with any assets that are being transferred.

If you are making a succession plan, then you will need to deal with its tax implications. If you are transferring your superannuation to your children, you will need to consider the tax implications of what you are doing. The Australian Taxation Office uses the “transfer balance cap” to determine how much superannuation can be transferred.

Talk to the Experts at NFPG!

Should you be thinking about your succession plan, one of the superannuation advisers at Newcastle Financial Planning Group can assist you. Get SMSF advice by scheduling an appointment today!

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DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.
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