Should they set up a self-managed superannuation fund

Reference no: EM133606273

Case: Sam and Mack have been life partners for many years, although they have no children. The following information is relevant to the years ended 30/6/2023 and 30/6/2024.

Mack, date of birth 19/5/1969, is employed full time as a journalist. Mack's employment contract includes a base salary of $200,000, with superannuation of 12% payable in addition to that base salary. Mack also salary sacrifices a personal contribution of 5% of base salary.

The fund is an APRA regulated industry fund, and Mack is in the accumulation (defined contribution) division, with an annual return averaging 5% pa after fees and insurance. Income protection insurance is an additional $500 per month. The account balance at 30/6/2022 was $1.5m, and at 30/6/2023 had increased to $1.65m.

Sam, DOB 3/3/1962, is self employed as a writer. Last year Sam's net taxable income was $55,000. Sam has contributed $5,000 to superannuation each year since 2018 and has claimed a tax deduction for this amount.

Sam's account is in a MySuper account with an industry fund. It is an accumulation (defined contribution) fund, with an annual return averaging 4% pa after fees and insurance. Sam's balance at 30/6/2022 was $450,000, and at 30/6/2023 had increased to $477,500.

Both superannuation funds invest in a diversified portfolio that includes franked dividends. The trustees trade shares on a regular basis and realise net profits from share trading.

The couple is planning to move from their home in the city to a semi-rural property in the Perth Hills. Their current property is valued at $1m, and the new property will cost $1.2m. They have access to savings to pay the difference in price. In addition to an inheritance of $800,000 that will be distributed to Mack later in the 2023/24 income year.

Taking account of the proposed property transaction and the inheritance that is anticipated during the year, advise what opportunities are available to increase their superannuation ahead of retirement.

Should they set up a self-managed superannuation fund? Briefly set out the reasons why you think that a SMSF would or would not be appropriate for these clients.

Reference no: EM133606273

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