About the author

Jim Prince is a fellow of CPA Australia and a tax specialist. He is a former lecturer and tutor in income tax law at LaTrobe University and teaches a number of wealth- creation courses for the Centre for Adult Education in Melbourne. He has authored several investment books, including Tax for Australians for Dummies, Shares & Taxation and Property & Taxation, and has written articles for Your Mortgage magazine and <http://thebull.com.au>. In 2000 Jim was nominated for an Adult Learners Week 2000 outstanding tutor award.

In his earlier years Jim worked for the Australian Taxation Office and also consulted to CPA Australia ‘TechniCALL’.

Preface

When compulsory superannuation was introduced in Australia in the 1990s, the federal government was sending a clear message to everyone that they had to fund their own retirement. To encourage you to participate in super, the government has introduced a number of tax concessions that may interest you. One such benefit comes when you reach 60 years of age and retire: you pay no tax then on all pensions and lump sum withdrawals, and they are both excluded from your assessable income. The amount you accumulate in your superannuation fund will ultimately determine the quality of your lifestyle in your old age. So it’s prudent that you make a contribution each financial year while you’re still gainfully employed.

Relying on the old age pension to subsidise your lifestyle in retirement is no longer a viable option, unless you can convince Centrelink that you’re destitute. To qualify for the old age pension you need to satisfy a strict income test and asset test. These tests check whether the total income you derive each financial year and the amount of assets you currently own fall within acceptable statutory limits. To make reliance on the age pension more difficult, the federal government plans to progressively increase the age for eligibility for the old age pension to 67 years by 2023.

The Income Tax Assessment Act 1997 permits individuals to set up and manage their own superannuation fund. Although you can gain significant tax benefits from managing your own super fund, like all good things in life it comes at a cost. There are strict rules and regulations you need to comply with, and there are stiff financial and criminal penalties in place if you contravene them. You also need to determine at the outset whether you can outperform the professionally managed funds to make your own super fund a viable and worthwhile exercise. So it’s important that you understand your duties and responsibilities and know that you’re capable of investing your money wisely.

The purpose of writing this book is to explain how the Australian superannuation system works, and more particularly the various statutory provisions you need to comply with if you want to set up and run a self managed superannuation fund (SMSF). The book explains in simple terms the core tax principles relating to superannuation funds, and offers numerous tax tips, points out potential tax traps and includes practical case studies to help you to save paying tax. You’ll also find a comprehensive list of legal citations to all the major tax cases relating to superannuation transactions. Much emphasis is placed on the following points:

• how the Australian superannuation system works and the benefits you can gain

• how much you need to accumulate to fund your own retirement

• how to set up an SMSF

• the rules and regulations you need to comply with if you want to manage your own super fund

• the rules associated with making a superannuation contribution

• how superannuation funds are taxed

• how to invest your money wisely

• the rules you need to satisfy to access your preserved benefits

• how superannuation pensions and death benefits are taxed.

Throughout the book you’ll have at your fingertips instant, at a glance, information about core tax principles, plus references to tax publications, tax rulings and tax determinations that tax professionals use to solve specific problems. You can quickly find these Tax Office publications and rulings on the Australian Taxation Office website <www.ato.gov.au>. You can refer to this practical guide at any time to find a particular publication or ruling to help you save tax on your super or SMSF.