Advantages of Life Insurance in a SMSF Fund

As part of recent legislation changes as part of the investment strategy trustees / members are required to consider the holding of life insurance on behalf of members within the fund.

There several advantages that may considered prior to undertaking this action.

  1. Even if you pay excess contributions tax, the benefits of the proceeds within super may still be worthwhile.
  2. Concessional contributions to the fund can be used to pay for deductible premium resulting in effectively no contributions tax.
  3. The life policy is owned by the SMSF on behalf of the member.
  4. Proceeds are substantially quarantined from the outgoing co owners debts and other legal liabilities.
  5. If paid to the SMSF, the proceeds of the life policy would then available in a “low tax” and ultimately a no tax environment.
  6. Premiums on the life policy can be funded through the superannuation guarantee charge ( that is, pre tax dollars).

REMEMBER, the above are issues that auditors focus on when it comes to the audit of a SMSF. Our audits for funds start from $300 and follow a comprehensive audit plan.

DISCLAIMER: The above is general advice only, you should not act on this advice without consulting a professional adviser to discuss your personal circumstances.