DT distribution to child's superfund

Discussion in 'Superannuation, SMSF & Personal Insurance' started by islandgirl__, 15th Jan, 2007.

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  1. islandgirl__

    islandgirl__ Well-Known Member

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    I don't know if this is possible. Can I set up a super fund for my 5 yo? I have a DT set up for investing his education fund etc and I know I can only distribute a small amount to a minor without causing the roth of the taxation gods. Can I distribute to a superannuation fund setup in his name? What would the implications of this be?
     
    islandgirl__, 15th Jan, 2007
    #1
  2. Simon Hampel

    Simon Hampel Founder Staff Member

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    One of the biggest implication would be that he cannot access that money for 60+ years !!!!! That's not a good thing in my books ... what if you wanted to help him buy a house, or a car, or pay for education etc ?

    I'm sure there are taxation implications too - so probably not recommended ... definitely need some advice here (will see if Nick can comment).

    My suggestion is to keep the money in your trust ... gives you much more flexibility. Even if the money is put into his name on paper only ... just keep a paper record (or in your book keeping software) of how much of the money in the trust is your son's ... so you can show him how it is performing.
     
    Simon Hampel, 15th Jan, 2007
    #2
  3. NickM

    NickM Well-Known Member

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    Unfortunately if a DT distributes to a Super fund, the fund must treat that income as "special income" and will be taxed at 47% on that income.
    not a recommmended strategy !
    NickM
     
    NickM, 15th Jan, 2007
    #3
  4. islandgirl__

    islandgirl__ Well-Known Member

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    Yep you guys are right. Thanks for the help
     
    islandgirl__, 16th Jan, 2007
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  5. Nigel Ward

    Nigel Ward Well-Known Member

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    Perhaps when your 5yo is earning a small wage he could join you self managed super fund and you could fund a contribution and your son could then benefit from the government's low income co-contribution...

    But of course in 10+ years' time the whole system will have probably changed again! :rolleyes:

    I think I mentioned in another thread that an insurance bond or friendly society bond would be another method of investing in your son's name but without the messy tax implications for him.

    I've generally been fairly negative about insurance bonds as the returns have been historically pretty average but I understand there's some new more diversified insurance bond products available which give you some choice of where the funds get invested. Might be worth a look?

    As always get your own investment advice specific to your circumstances.

    Best regards

    N.
     
    Nigel Ward, 16th Jan, 2007
    #5