Australians can now choose to put their super contributions with an independently managed super fund or with their own self managed super fund (SMSF).

Self managed super funds (SMSF), also called DIY Super, perform the same role as other super funds – super contributions are invested into this super fund, which is then made available to you upon retirement. However, the key difference with a SMSF is you can decide what you invest in and when your benefits are paid, as long as you comply with Australian superannuation law.

Some of the key features of a self managed super fund (SMSF) include:

• A SMSF must be maintained for the 'sole purpose' of providing benefits to members upon their retirement

• Trustees are required to prepare and implement an investment strategy for their self managed super fund. This controls the way contributions are invested

• Wide flexibility in investment choice, for example, direct property (residential property, commercial property or rural property), managed investments and direct shares can all be included in the portfolio

• Approved auditors must be appointed and tax agents, accountants and financial planners may also be involved in the running of the self managed super fund

• Ultimate legal responsibility rests with the individual trustees (members of the super fund), even if assistance is outsourced to the above financial professionals

Managing your own super fund ultimately gives you greater control and flexibility. The discretion to pick and choose your own strategy and investments, as well as the tax benefits of superannuation make self managed super funds a unique investment tool.

There are two major benefits to a self managed super fund:

Cost

SMSFs can be very cost effective, but it really depends on the type of investments you hold and how frequently you change those investments. A SMSF will cost in the range of $1,500 to $2,500 each year to 'maintain'. Therefore, if you have $250,000 in your SMSF, the total maintenance cost is in the range of 0.60% to 1.00% which, depending on the investment strategy of your SMSF can be very cost effective.

A particularly positive aspect of having your own SMSF is that there are a number of fixed costs that don't increase depending on the size of your super fund. For example, the cost of auditing your super fund and preparing the super fund's tax return will probably be the same, whether you have $250,000 or $2.5 million.

The key here is to compare the costs of different strategies – whether an SMSF, an industry superannuation fund, or a retail superannuation fund. You have to do the homework, together with your financial planner.

Control

With your own SMSF you have control, subject to the super fund's investment strategy and the technical rules about SMSF investments, over what you invest in, when you invest and when you change your investments.

Whether this level of control is for you - only you - together with your financial planner, can decide. Some people feel more comfortable being able to control their superannuation investments. For others, they would prefer to have their investments professionally managed.
If you have the experience, knowledge and confidence to manage your SMSF's investments, then having your own SMSF can be a very rewarding challenge.

When should a self managed super fund be used? It is not for everyone

A self managed super fund can be an appropriate vehicle if you want the flexibility to manage your own superannuation investments directly. However, having an SMSF is not for everyone, and using an industry superannuation fund or a retail superannuation fund may provide you with sufficient flexibility and cost-effectiveness. It's your choice and we recommend you speak to a financial planner to decide whether a SMSF is the best option for you.

What's involved in setting up and running a self managed super fund?

It is reasonably easy to set up your own SMSF. Your financial advisor can help you, or you can do it yourself.

If you have decided to have a company as trustee, you will need to register the company to be the trustee and obtain an SMSF trust deed. This normally costs around $800 to $1,500 and takes about one week. There are many businesses that sell SMSF trust deeds.

You will need a deed that is fully up-to-date with the laws and that provides maximum flexibility. For example, the deed should permit the super fund to borrow. Then you will need to apply for a Tax File Number, an Australian Business Number, and you will have to establish a bank account in the super fund's name. Once all this has been done, you might like to roll over your existing super accounts into your new serlf managed super fund and change your payroll details, so that your employer can contribute into the new super fund.

You will need to appoint an accountant and auditor (probably from the same firm) to prepare your SMSF accounts, tax return and audit every year.

Once your SMSF has been established, you need to manage it and its investments, and in particular, keep proper records of all transactions. This will be essential if your SMSF is ever audited by the Tax Office.

At least in the beginning, we recommend you seek professional financial advice, whether from your financial planner or your accountant.

Professional financial advice is critical

Although there are many advantages to a self managed super fund, it is important that you seek professional financial advice from a certified financial planner first to establish whether this is right for you.

Talk to your Intellichoice financial planner on 1300 55 10 45 about establishing, managing, administering and forming your investments strategy with a self managed super fund. Alternatively, view the superannuation FAQs for more information about super and self managed super funds. If you are thinking of buying property with your self managed super fund, you can speak to the mortgage brokers at Intellichoice Financial Services. Our mortgage brokers can assist with your SMSF home loan and can also source a property for you.

Salary sacrificing to super occurs when you elect to have your employer invest an additional portion of your pre-tax salary into a super fund for you. When salary sacrificing, you effectively reduce your gross taxable income, which effectively means you could pay less tax. Employer super contributions are taxed at 15% and therefore, the sacrificed amount could be more favourably taxed than if taken as cash salary. Remember that you cannot access any money you contribute to super until you have reached your preservation age and retire from the workforce.

Salary sacrificing can be a tax effective way of saving for retirement, but to find out whether this is suitable for your current financial circumstance, we recommend that you seek professional financial advice first from our financial planner.

Salary sacrificing can:

• boost your super and increase the level of retirement savings you have

• reduce your income tax

• increase your take-home pay

There are a range of benefits you can include with salary sacrificing:

• Super

• car fringe benefits

• Electronic devices, such as your laptop, mobile phone or PDA

• Expense payment fringe benefits such as school fees, child care costs, home loan repayments

Take note of the following points before you set up your salary sacrifice arrangement:

• Additional taxes: if you are salary sacrificing for superannuation purposes, there may be a surcharge

• Employer's contributions to super fund: The usual 9% rate may be reduced when reducing taxable income through salary sacrificing

• Low income earners: If you earn under $25,000 a year, there may be little tax advantages to you salary sacrificing, because the tax rate on your salary is the same as the tax on your super contributions

• Deductions: You cannot claim deductions or tax offsets for salary sacrificing, because your employer is considered to have made the contribution for you. You also cannot claim a deduction for the cost of any administration fees paid to your employer to enter into and maintain a salary sacrifice arrangement.

• Fringe benefits tax: Salary sacrificing is not a fringe benefit and thus, is not subject to fringe benefits tax. It should not be reported as such on your PAYG payment summary

There are some restrictions to salary sacrificing including,

• Your employer can place limitations on the amount of salary sacrifice they will allow

• It is not compulsory for your employer to offer salary sacrifice

• Once you salary sacrifice into super, it generally must remain there until you retire. This is referred to as 'being preserved'

• You can only salary sacrifice future benefits

• You cannot salary sacrifice award payments

• You cannot put bonus or commission payments into superannuation as salary sacrifice after they have been earned

• There is a limit of $25,000 per year that you may receive as Concessional Contributions (employer superannuation guarantee, salary sacrifice and other employer contributions). All concessional contributions that exceed this limit will be taxed at the highest rate of 46.5%

• Members aged 50 years and above are entitled to a higher limit of $50,000 per year until 1 July 2012, when the limit will be decreased to $25,000 for all members regardless of age. if you exceed this limit, the contributions will be taxed at the highest tax rate of 46.5%

• For people earning %58,980 or less, making after-tax super contributions and accessing the Government Co-contribution scheme may be more beneficial

• Speak to a financial planner about the taxation implications when you eventually retire and access your superannuation

• Your salary sacrificed contributions may count towards the 9% contributions that your employer must make under the superannuation guarantee. This means your salary sacrifice can reduce the amount your employer is required to make. A salary sacrifice contribution is officially classed as an 'employer contribution'

To set up a salary sacrifice arrangement, speak to your employer first to make sure this option is available. Alternatively, you can contact one of the financial planners at Intellichoice on 1300 55 10 45 for more information on how to proceed, whether it is suitable for your current circumstances or if salary packaging is more suitable for your needs.

Salary packaging allows employees to reduce their tax payments at no cost to your employer by paying for items with your pre-tax salary. Salary packaging allows you to restructure your existing salary by choosing to receive it as a combination of take-home pay (cash) and a mix of approved fringe benefits that are paid out of your pre-tax salary. This will effectively reduce your taxable income, and therefore the amount of tax you pay.

For example, your salary package could include a car lease. Your employer would pay the car lease on your behalf using your pre-tax salary. However, as you are now receiving less cash, you pay less PAYE income tax.

Salary packaging can be a tax-effective way of getting more out of your pay and in essence, increase the value of your salary. Salary packaging is very flexible and at the discretion of your employer, it can be tailored to your current situation and future goals.

There are a wide range of benefits that can be included in salary packaging including,

• superannuation

• car benefits, for example motor vehicle leasing

• loan related benefits

• childcare and recreational facilities

• income protection insurance

• employee share plans

• membership fees and subscriptions

• laptops, notebooks, electronic diaries and other similar portable computers and employment related software

The benefits you can salary package are dependent upon your field of employment, and at the discretion of your organisation and the financial planners at Intellichoice can assist in providing you with insights and tips on how this can be used to your advantage, thus getting the most out of your salary.

Salary packaging offers many significant advantages to both employers and employees.

Benefits of salary packaging to employees include:

• Potential to achieve substantial and legitimate taxation savings

• Reduction or removal of liabilities such as the Superannuation and Medicare Surcharge levies

• Flexibility to choose a remuneration structure based on your individual needs and preferences

• Integration of personal financial planning and salary packaging

Benefits of salary packaging to employers include:

• Significantly reduces employment costs such as Payroll Tax and Worker's Compensation

• Increases your franking account, which allows increased tax-paid dividends to shareholders for no additional cash outlay

• Enables you, if required, to provide selected employees with a 'de-facto' pay rise of up to 50% per annum for no additional cash outlay

• Can assist you in attracting and retaining the best staff

• You can design a more efficient incentive program

• Allows you to communicate Total Employment Costs to employees, beyond simple salary (cash-pay) costs

• Your employees can alter their packages to accommodate change - without you incurring additional or unnecessary costs

• Provides for a more effective control of remuneration costs

• Manage human resources' costs as normal budgeted business expenses

• A cost efficient option

For more information about salary packaging or salary sacrificing and how it can reduce your tax payable, speak to one of the financial planners at Intellichoice on 1300 55 10 45 to find out whether this option is the best solution for you.

Superannuation, or as it is most commonly called – super, is a special way of saving to provide yourself with an income when you retire. While there are other ways of saving for retirement, superannuation saving is different because it is linked with your employment. For many Australians, superannuation will be their main form of retirement income.

The Australian government provides significant tax concessions to encourage us to fund our own retirement and a financial planner from Intellichoice will be able to tailor a tax effective strategy to help boost your superannuation savings.

Some of these strategies include:

• salary sacrificing

• government co-contribution

• spousal super contribution

• self managed super funds (SMSF)

• salary packaging and more

What is Super?

Most Australian employees receive an amount of 9% of their salary, called the 'superannuation guarantee' which is contributed to a super fund by their employer. While you are working, your super savings grow because money is paid into your super account regularly, which can be invested through your super fund.

Superannuation is a tax advantaged place to save and invest for your retirement. Apart from tax deductions available on contributions, earnings are taxed in the fund at a reduced rate of 15% instead of at your marginal tax rate plus the Medicare levy which could be up to 48.5%. Most capital gains in super are also taxed at an effective reduced rate of 10%. Your retirement benefit will also be subject to concessional rates of tax when you retire.

Please also ensure that your Tax File Number (TFN) is provided when setting up your super fund. When a TFN has not been supplied to your super fund, concessional contributions (such as the 9% Superannuation Guarantee and salary sacrifice contributions) will be taxed an extra 31.5% (a total of 46.5%). Also, funds may not be able to accept voluntary member contributions if you have not provided your TFN.

Contributing to your Super

You can make personal contributions to super at any time up to the age of 65. From age 65 to 74 you can contribute if you have worked at least 40 hours in no more than 30 consecutive days in the financial year the contribution is made. From age 75, no contributions can be made.

Your employer will usually make superannuation contributions on your behalf as a result of the Superannuation Guarantee Charge (SGC). However, the level of this contribution at 9% of your salary is unlikely to be sufficient to meet your retirement needs. You will most likely need to make additional contributions at some time to boost your retirement benefit.

Please note that if your employer pays your super, there is generally no tax deduction available for additional personal super contributions. If you are a moderate or high income earner you might consider salary sacrifice in order to make additional contributions to superannuation as it will likely be a tax effective strategy for you depending on your personal circumstances. If you are a low or moderate income earner you may be eligible for a co-contribution from the federal government.

However, a person who is self-employed (or substantially self-employed in that less than 10% of their assessable income and fringe benefits comes from outside employment) is entitled to claim a deduction for personal super contributions. As with employer contributions there is a limit that depends on your age, on the amount you can claim each financial year.

For more information about superannuation and whether you have enough for retirement, speak to an Intellichoice financial planner on 1300 55 10 45 or email us directly and one of our financial advisors will be in touch with you within 24 hours. Alternatively, please view the finance FAQs for an overview of some common questions about superannuation.

Types of super funds in  Australia

There are different types of superannuation funds available including the following:

• Employer/corporate/staff super funds: these super funds are established by the employer for the benefit of their staff

• Personal super funds: you personally join as an individual through a super fund provider. There are many super funds available who offer a wide range of investment choices. You can speak to a financial planner about the various super funds available and which one would best suit your needs

• Industry super funds: these types of super funds were originally set up for people working in specific industries, for example, health care or hospitality. Many are now available to the general public

• Self managed super funds: also called DIY super funds, these super funds perform the same role as other super funds, by investing contributions and making them available to members on retirement. The difference is, that the members of self managed super funds (SMSF) are also the trustees. They control the investment of their contributions and the payment of their benefits. With all members being trustees, they are in a position to ensure their interests as members are protected

Self managed super funds do not suit everyone, so before setting one up, it is advised that you seek professional financial advice first.

How can a financial planner help me?

With everything that has happened with Australian superannuation, it's only natural you get some professional financial advice to help make sense of everything. A qualified financial planner will assess your current financial position and work out whether you are on track to meeting your personal and financial goals and whether you will have enough funds for a comfortable retirement. A financial planner will take the following things into account based on your unique situation and circumstances:

• A strategy to build savings and create wealth through investments

• Protect your family and lifestyle with an appropriate insurance plan

• Save for your retirement

To find out how an Intellichoice can financial planner can help you grow your superannuation funds for retirement and reduce your tax, call 1300 55 10 45.