Copyright (c) 2014 Kerrie Peacock
The Australian Taxation Office (ATO) states that anyone can set up their private super fund, which they can manage by themselves, but following strict regulations. Such an SMSF (self-managed superannuation fund) may have 1 to 4 members. In such a situation, every member becomes a trustee or a director.
Whether you intend to have TPD insurance in SMSF or buy TPD cover from an existing super fund, you must make certain considerations. The critical aspects to consider include:
Variety Of Options In Investment And Benefit Payment
An existing super fund offers the luxury of a wide choice of options for investment and benefit payment. This is derived from the established and well-designed structures in such organizations, supported by numerous competent personnel and large sums of investment capital from member contributions.
Various Options For Benefit Payment From A Super Fund Include:
1. Lump sum payment from your super fund.
2. Transferring your benefit payment into an income account that provides investment of your money, while you draw regular income. An example of this is the income account offered by QSuper (a super fund of the Queensland Government), that allows members to deposit a minimum of $30,000 into one or several income accounts.
3. Putting your benefit payment into an accumulation account which offers various investment options that range from low risk/ low return to high risk/ high return avenues.
4. Rolling over your benefit payment into another superannuation fund
Such a variety of investment and payment options may not be available in SMSF. However, if you intend to implement such investment options within SMSF, you would require a complex array of skills and assistance from highly skilled professionals. This may also be quite costly, especially since the amount of money you have in SMSF would be much less than existing super funds.
Process Of Lodging A Claim
A key drawback with regular super funds is the issue of lodging claims and receiving your benefit payment. Usually, the process is quite lengthy, since a super fund would have to process the claims made by a huge number of members.
The case is different for TPD insurance in SMSF. An SMSF has very few members; hence the process of lodging a claim and getting your benefit payment would be less tasking and much faster.
Tax Deductibility Of Premiums For TPD Insurance In SMSF And In Super
The premiums for TPD insurance within a super fund are normally tax deductible.
In the case of an SMSF, the Australian Taxation Office states that this type of fund can claim deductions for premiums on TPD insurance policies if there exists a connection between such a payment and a contingent or current liability of the SMSF to provide 'disability superannuation benefits'.
Access To The Superannuation Complaints Tribunal
The Superannuation Complaints Tribunal acts as an independent body for dispute resolution involving a wide range of complaints related to superannuation. This is a free and 'user-friendly' alternative, rather than the expensive method of seeking resolution through regular court systems.
Although the Superannuation Complaints Tribunal receives complaints from current or former members of regulated superannuation funds, it is not open to members of self-managed superannuation funds (SMSF).
Article Source: http://www.abcarticledirectory.com
Kerrie Peacock regularly evaluates the regulatory issues regarding personal insurance within Australia and offers useful advice in selecting the best insurance options. Visit www.mecovered.com.au/tpd-insurance-in-smsf for more information on personal insurance.
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