Insurance and self-managed super: don’t get caught out!
Self-managed super funds are now the fastest growing part of the superannuation market in Australia, with more than one million of us being members of an SMSF.
SMSFs have become a popular way for Australians to build their retirement savings because they generally offer greater control and flexibility of your super investments.
And while thousands of new self-managed funds are being established every year, there are some technical areas that can ‘trip up’ the average SMSF super member.
According to Mohamed Said of Avante Financial Services, insurance can be one of the trickier aspects of SMSFs that members need to be aware of.
“As seems to happen regularly with superannuation laws, legislation changes can and do affect what people can and can’t do with their super savings.”
“New insurance policy regulations were introduced in July 2014 to ensure greater consistency between SMSFs and regular super funds,” says Financial Adviser, Mohamed.
“It’s now a little clearer as to what types of insurance can and can’t be purchased by SMSFs.”
| Allowed within SMSFs | Not allowed within SMSFs |
| Life insurance | TPD – ‘own occupation’ |
| TPD – ‘any occupation’ | Trauma cover |
| Standard income protection | Comprehensive income protection |
And while Life, TPD (Any Occupation) and Standard Income Protection policies can be purchased by SMSFs as shown in the table, Financial Adviser, Mohamed warns that this cover will have some restrictions compared to the same cover purchased outside super.
In the case of life insurance, for example, payouts from SMSFs can be subject to tax under certain circumstances, unlike policies outside super where payouts are generally tax-free.
“Insurance within SMSFs can be complicated where exceptions exist, so it’s worth exploring your personal situation with a financial adviser,” he says.
Whether you’re already a member of an SMSF or you’re thinking about establishing one, a Avante Financial Services adviser can discuss your personal financial situation and help you make a decision that is suitable for you.
To discuss your needs, book an appointment with Avante Financial Services on 02 8730 0246, or you can send an email to info@avantefs.com.au.
