In recent years there has been an explosion in the number of Self Managed Superannuation Funds (SMSF) in this country. With in excess of $400 billion under management, SMSFs are now the largest and fastest-growing segment of Australia’s $1.28 trillion superannuation industry. That figure has tripled in the last five years and there are around 450,000 SMSFs funds with more than 830,000 members. Statistically speaking, less than 3% of the 32 million superannuation accounts in Australia are in a SMSF but they own almost a third of all the assets.
What is a SMSF?
A self managed superannuation fund is a do-it-yourself superannuation fund of one to four members where each member acts as a trustee of the fund. So all members must be the trustees and all trustees must be the members. It is possible to have a ‘single member fund’ that requires two individual trustees or a corporate trustee.
Your SMSF must have its own bank account and a trust deed. The deed is basically the rules of operation and sets out who can be a member, how they’re admitted as a member, what the fund can invest in and who can receive a death benefit. Your own SMSF requires an annual audit plus they need to lodge a tax return with the Australian Taxation Office.
Establishing your own self managed superannuation fund is a very important financial decision but before you decide to go down this pathway you need to know the costs and understand your legal obligations. While managing your own SMSF can offer many benefits, they are subject to considerable compliance and regulation.
One of the primary reasons why self-managed superannuation funds have grown in popularity in recent years is the fact the members have greater control over the range of investments, the ongoing management fees and ultimately their tax payable.
When contemplating the establishment of your own self managed superannuation fund you need to weigh up the advantages and the added responsibilities. For many Australians, SMSFs offer four major advantages:
1. More control over your investments
2. Greater investment flexibility
3. Generally lower fees than industry and retail funds
4. Potentially better performance than industry and retail funds
Having a SMSF lets you take full advantage of tax and superannuation law changes as soon as they come into effect. They also provide families with a vehicle to pool their resources and grow their wealth together. You can effectively transfer wealth between generations and these estate planning benefits may not be available through conventional superannuation products.
A SMSF arguably offers even more tax benefits when you consider the ability to segregate accounts and share imputation credits. Finally, your own SMSF also provides portability because your account stays with you wherever you go provided you remain within the framework of Australia’s superannuation laws.
More Control & Flexibility
As a trustee of your own SMSF, you can control where your retirement savings are invested. Compared to ‘off-the-shelf’ superannuation funds, you have a wider choice of investment options including listed shares, bonds, listed investment companies (LICs), exchange traded funds (ETFs) and direct property. You can also transfer personally owned listed shares and managed funds directly into your SMSF plus they can own ‘business real property’ (property used wholly and exclusively for business).You can devise your own investment strategy, actively manage the range of investments and adjust your portfolios as markets change.
Lower Management Fees
Unlike retail and industry based superannuation funds, the members of a SMSF (up to 4 and usually family members) can combine their assets to accumulate retirement funds. This can provide a more cost effective outcome because aSMSF with pooled assets in excess of $200,000 can generally reduce the average cost of managing the fund to below 1.0% per annum.
The Commonwealth Government report, ‘A Statistical Summary of Self-Managed Superannuation Funds’ released in December 2009 (based on ATO and APRA data) found that SMSF members generally paid lower fees in the 3 year period to June 2008. The report also indicated that on average, SMSF investments performed better than all other super funds over the same period.
A SMSF offers the members a number of tax concessions including:
Establishment & Administration of Your SMSF
The administration and compliance of your SMSF is very important. We can help you with:
Establishment - including all the requisite forms and paperwork to establish your SMSF. You can then administer the fund yourself or you can use our SMSF administration service. The steps generally involved in setting up a SMSF include:
Our service offering includes all of these functions including:
Administration - we can assist you with the ongoing administration of your SMSF including:
SMSF Investment Strategy
SMSF Trustees must prepare and implement an investment strategy for the fund. All investment decisions must be in accordance with that strategy and it should be regularly reviewed. It must reflect the purpose of the fund taking into account:
How We Can Help You …
The establishment and ongoing maintenance of your SMSF can be both complex and time consuming. We offer you a range of tailored accounting, administration and compliance solutions including:
Our service can be customised to suit your needs and contact us today regarding your SMSF queries.
We invite you to book a FREE, half hour introductory consultation to discuss your superannuation needs. To make a booking call us today on (03) 5941 4868 or complete your details in the box at the top of this page.