The rules around superannuation remain unchanged in the recent Federal Budget with the government further advising there will be no new taxes in its current term. This is good news for the half-a-million Self Managed Superannuation Funds (SMSF) and for those who are looking to establish one.

 

The number of SMSFs is growing at a rapid pace. During the past ten years, more than a million Australians have transferred their Super from industry and retail Funds to SMSFs. It’s all about taking back control.

 

Many people ask us, why go to all the cost and bother of establishing a SMSF? The answer is because the long term benefits and security far outweigh the initial effort and time taken.

 

Having more say and control over your investment strategy means safe-guarding your financial future. It allows:

• Choice of investment options including cash, managed funds, shares, rental properties, commercial properties and other assets.

• One fund for the entire family. You can manage up to four members in one SMSF.

• Potential tax savings. Business real estate and listed personal shares can be transferred from members to the SMSF with favourable tax treatment of their returns. If fund assets are subsequently converted to tax free pension assets on retirement, then capital gains tax may be eliminated or reduced within the SMSF.

• Flexibility in Estate Planning. It may be possible to structure your SMSF so that member benefits may be paid to beneficiaries in the most tax effective manner.

• Potentially lower costs and higher returns depending on your investment decisions due to lower management fees, more effective investment strategy and less tax.

• SMSF can access additional funds for investment by borrowing using a limited recourse loan.

• Insurance such as life insurance can be established through your SMSF and for some insurance types the premiums are tax deductible.

 

I’d like to share two important pieces of advice. Firstly, before you get started, you need to have a good understanding of what it means to be a trustee of your SMSF, as SMSFs are not suited to everyone’s needs. As a Trustee, you’ll need to be mindful of your obligations as you are personally liable for any decisions you make. Although there is no minimum requirement, it is more cost effective to establish a SMSF when you have significant assets ($200k or more) to invest. You should allocate regular time each week to manage your fund which must be invested for the sole purpose of accumulating future savings for retirement.

 

Secondly, the very best advice on exactly what to do and how to do it will come from using the professional services of a trusted accountant and financial adviser who will guide you along every step of the set-up process. Importantly, choose an advisor that is experienced in this area as they can also provide ongoing and invaluable assistance on how best to take - and keep - control of your SMSF.