Self Managed Super for Tradespeople

TradesmanWe all know that the SMSF industry is booming in Australia, and one of the growing users of self managed super are tradespeople.

One of the major reasons for people switching to an SMSF is due to the ability to invest in direct property, which is of course a very popular form of investment here in Australia.

Given that tradesmen generally work in the property industry, it’s little surprise that many are looking to invest their retirement savings into property.

Tradespeople and Superannuation

Many tradies in Australia work for themselves, either as business owners or subcontractors.

SMSFs have proven to be popular with self-employed workers from other industries, so again it’s little surprise that tradies are also attracted to this form of super.

Advantages

There are plenty of advantages to holding your retirement savings in an SMSF in general, and a number of advantages that are specific to tradesmen.

Direct Property Investment

When tradesmen reach the point of having surplus income to invest, often property is the first option considered.  This is true of many Australians, but especially tradies who are so involved in the property industry.

Unlike all other forms of superannuation, an SMSF is the only vehicle which allows investment into direct property.

Renovations

SMSF holders have been able to borrow money to purchase investment properties for many years, but recent changes mean they can also borrow for renovation costs.

Tradesmen involved in property renovation may be able to access the double benefit of being able to borrow money via their SMSF and access materials and labour at a reduced cost to maximise their profits.

If you are planning on doing the renovations yourself using money from an SMSF loan you should first seek advice from your accountant, especially if you are planning on invoicing your SMSF for your own labour.

Insurance

Many tradesmen, especially if they are self-employed, will be required to hold a range of insurance products for themselves personally as well as their business.

Some forms of tradesmen insurance can be held via an SMSF, which means that the premiums can be paid from retirement savings instead of coming from your personal cashflow.

The types of insurance for tradesmen  which can be held via an SMSF include income protection insurance, life insurance and in some cases TPD insurance.

Other forms of business insurance such as public liability and tool insurance cannot be held through an SMSF or any other type of superannuation.

Business Premises

Most tradesmen do not have their own business premises, but for those that do there is an opportunity to invest in your business premises via an SMSF.

Your SMSF can purchase a workshop or other business premises which you can then rent from your super fund.  The main thing to keep in mind is that you or your business has to pay full market rental to your SMSF.

Disadvantages

Whilst there are plenty of advantages to tradies saving for their retirement via self-managed superannuation there are also a couple of disadvantages to consider.

Most tradies, and all business owners for that matter, hate paperwork.  This can be a problem since an SMSF will generally involve a lot of time and paperwork.

There are SMSF administration providers that can help to reduce the paperwork burden, but there will always be work required, especially at audit and tax time.

More Information

If you are a tradesperson and are considering moving your retirement savings into an SMSF it is a good idea to first seek professional advice from an expert.

Your accountant will be able to provide some information, but generally you are better to speak with a financial planner who specialises in superannuation and retirement planning.

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