SMSFs and Retirement Planning

CD is a client of ours, who loves the share market.

He worked hard in the telecoms industry all his life, but wanted control over his retirement savings. Just before retirement CD sold a block of land he had owned for years in Perth (tax-free ? ask us how) and used the proceeds to top his superannuation.

CD wanted to control his retirement and was a believer that the share market was the place to do it. He couldn?t pick the growth stocks he wanted via an ordinary retail or industry fund, so we recommended he roll his superannuation into his own Self Managed Superannuation Fund (SMSF).

Check out:?What is a Self-Managed Super Fund (SMSF)?

Once this happened CD was able to invest his choice of equities form the ASX and has seen some substantial growth, in particular post the GFC crash where he was able to pick up some bargains. This strategy of picking up bargain basement stocks meant a large capital gain when the market corrected itself. Before selling we advised CD to commence a pension from his SMSF. This effectively meant all income (bank interest, share dividends, capital gains) within his fund were taxed at 0%. CD has just substantially increased the value of his SMSF and didn?t pay any tax on it. All he needed to do was have a chat with us and draw out the minimum pension from cash reserves in his fund.

CD now has his SMSF funds in a mixture of cash to pay his annual pension (this is tax-free to CD as well, with his personal tax return being non-taxable for the last eight years) and also in some equities he expects to go boom.

Check out:?SMSFs: Why Are They So Popular?

CD doesn?t really need the cash he withdraws from his pension right now, so he wanted to cease his pension payments. This would cause his SMSF to become taxable again. After a discussion with us CD revealed he is holding two particular stocks he expects to go gangbusters (one has already gone from $0.68 a share to $1.38 which is the tip of the iceberg in CD?s mind). His strategy is to wait for an upcoming announcement, wait for the price to triple, then sell. He expects this all to happen before 30 June 2019.

Our advice to CD was to remain in pension mode. Why? Because that triple price sell down will be worth $800,000 and represent a $650,000 capital gain. Without remaining in pension mode CD would have lost at least $65,000. When he sells he will pay nothing. When he draws this cash out for his next round the world holiday, he will pay nothing.