At its most basic, a self-managed superannuation fund is simply another type of trust, but it is restricted in what it may distribute. These restrictions are determined by superannuation legislation.
The taxation benefits offered by a superannuation fund are great and include:
- Income from the fund is paid at 15 per cent and there is no Medicare levy;
- Capital gains tax within the fund is 10 per cent;
- No tax is paid on income drawn on retirement; and
- The non-deductible portion of the super fund that is created either by fund earnings or deductible superannuation contributions such as those made by an employer,receive a 15 per cent tax offset to further reduce tax liability.
There are a number of restrictions to superannuation.
The ‘sole purpose’ test
Any asset purchased as part of a superannuation fund must be for the sole purpose of providing retirement income. This means that property cannot be purchased with the intention of providing a house for yourself or others in the family.