So you’ve heard about self managed superannuation fund and is curious to know more about it. Well, the first thing you should be told about is that although the number of self managed superannuation funds in Australia has exploded in the recent years, it is not for everyone.
Basically saying, a self managed superannuation fund (SMSF) is a do-it-yourself super fund with a sole purpose to provide benefits to its members. This fund allows a maximum of four members, and each member acts as a trustee of the super fund. It is governed by a trust deed formal that outlines the formal set of rules of operation for the fund and must have an investment strategy to detail what investments are allowed and which ones are not. The fund also must have its own bank account, requires an annual audit and must lodge tax return with the Australian Taxation Office (ATO).
There are five main advantages of setting up a self managed superannuation fund.
1. As a trustee of your own superannuation found you can control where your retirement savings are invested. You can transfer personally owned shares and managed funds into your super fund, and you can devise your own investment strategy. Plus you can actively manage your portfolio as markets change. A self managed superannuation fund also offers portability because your account stays with you wherever you go, provided you remain within the framework of Australia’s superannuation laws.
2. An SMSF provides greater investment flexibility as you have a wider choice of investment options including listed shares, bonds, and direct property. It can also own business real property, which is a property used wholly and exclusively for business.
3. Potentially lower management fees. Unlike retail and investment based super funds, the members of an SMSF can pull their assets to a retirement fund and this can result in a more cost-effective outcome.
4. The potential for higher returns. There is no guarantee, but with more control, a wider range of investment options, and lower fees, it is possible.
5. An SMSF provides some key tax concessions and their flexible structure provides families with a vehicle to pool their resources and grow their wealth together. As such, you can effectively transfer wealth between generations and these estate planning benefits may not be available through conventional superannuation products.
While all these advantages certainly make a self managed superannuation fund an attractive retirement plan, it does not suit everyone. There are strict regulations and if you are considering starting your own SMSF you should consider seeking the advice of an SMSF consultant. Establishing an SMSF is an important decision and an SMSF consultant will help you establish, manage, and maintain your fund to ensure it is a profitable one.