What you need to know about Self Managed Super Funds

What’s all the hype about?

Having a retail or industry super fund you are potentially putting the fate of you and your families’ retirement future in the hands of someone you may have never met. More importantly they may have no idea of your goals and longer-term retirement and lifestyle plans.

This is one of the main reasons why more and more Australians today are considering establishing self managed superannuation funds (SMSFs).

The popularity of SMSFs has increased dramatically over the last 15 years. In 1998 approximately 10% of all superannuation assets were held in SMSFs, as of October 2012 that figure has jumped to 33% or $450 billion. Experts anticipate that value of assets held in SMSFs by 2033 will exceed the value of the Australian Stock Exchange.

In this article, we aim to give you an overview of what a SMSF is, its risks and benefits. To help you determine if you would like to enquire further about the suitability of a SMSF for your retirement goals.

What’s an SMSF?

Simply a SMSF is a trust, like all trusts there is certain steps you must follow under trust law to ensure your fund is set up correctly. A trust is an arrangement where a person or company (the trustee) holds assets (trust property) in trust for the benefit of others (the beneficiaries/members). A SMSF is a special type of trust, set up and maintained for the sole purpose of providing retirement benefits to its members (the beneficiaries).

Why choose a SMSF?

The main concept behind an SMSF it to provide members ultimate control and therefore responsibility in managing their superannuation. A SMSF allows trustees to determine what type of trustee they would like (individual or corporate), the assets they invest in, who the members will be, who are the beneficiaries and the use of more advantageous tax strategies by incorporating the use of accounting treatment only available inside the SMSF environment.

A SMSF also allows for borrowings (under strict and limited borrowing arrangements) in order for the SMSF to maximise its return to members through allowing a larger asset base to be acquired within the fund through gearing.

Trustees can also determine when benefits are payable, how they are to be paid and the most tax efficient way to do this. There is also the flexibility in determining when tax is paid by the fund. With multiple member funds (maximum of 4) the running costs can be significant reduced by utilising a SMSF rather than multiple retail and industry funds.

Is an SMSF for you?

It is important to know that certain ATO requirements must be met and maintained when setting up and running your SMSF. Unlike regular super funds, which are regulated by APRA, a SMSF sits under the ATO for compliance purposes.

A Financial Planner will be needed to assist you in determining the suitability of a SMSF based on your current and future requirements and also to assist the trustees in developing the ‘investment strategy’. An Accountant and Lawyer will also be required to assist with the set up of the various trust deeds and the ongoing compliance of your fund.

As the trustee of the fund you have the ability to hand pick a team of experts to assist you along your journey, it is important that you feel comfortable with them as they will be advising you on the best strategies to achieve your retirement plans.

Last of all, if you decide to establish a SMSF, you must be aware of the risks that come with this responsibility. You as the trustee are ultimately responsible for the compliance and management of your fund. Breaching these requirements could deem your fund as ‘non-compliant’ incurring significant penalties.

There you have it, a snapshot of what some are calling the biggest buzz in our retirement planning lifetime – self managed super.

While this may not cover everything you need to know, if you have an interest in learning more a meeting with an expert is the next step in getting you started towards designing your retirement future.

Contact our team on (08) 9289 7777 to arrange your meeting with our national group IPAC.