Reserves work for SMSFs too

Financial planners need to establish self-managed super funds (SMSFs) with reserves to create more flexibility, according to the principal of SMSF Strategies, Grant Abbott.

Speaking at the Self-Managed Super Fund Professionals' Association of Australia conference, Abbott said SMSFs with reserves could move money around a lot more easily.

“If you put money into a member’s account, the money can’t be touched. But if you place money into reserves, then you can start to move it around. By moving these around, we can start to add a completely different hybrid dimension,” he said.

Abbot said that if a fund ran reserves, it wasn't required to do a fair and reasonable allocation to super members.

Investment reserves could also smooth and enhance flexibility, he added.

Self-insurance reserves would allow you to get a large tax deduction for amounts set aside in order to pay disability, life insurance, or death benefits, he said.

Anti-detriment reserves were also an option but they had to be built inside the pension reserve, because when they were paid out, anti-detriment payments were considered a super contribution by the Australian Taxation Office, Abbott said.