What is a Self Managed Super Fund (SMSF)?

A self managed super fund (SMSF) is a private superannuation fund that is you manage.  It can have up to 4 members and as trustees, have responsibilities for decisions made about the fund.

Many SMSF trustees will utilise professional services for managing the administration of the fund such as an Accountant for tax returns, Auditor for ongoing audit of the fund and Financial Adviser for portfolio management and strategies.

We believe that it’s important that you consider the experience and expertise when choosing your professional service providers for your self managed super fund as it is definitely a niche area with many complexities and strategies available.

We are generally happy to work with your current accountant, or if you are seeking an SMSF specialist accountant, then we have a panel to refer you to.

What can a Self Managed Super Fund invest into?

Control of your retirement savings is one of the most common reasons that people establish their own self managed super fund.

The wide range of investment options provides you with this control.   Asset classes that can are often invested into include:

– Australian and Global Shares

– Residential Investment Property

– Commercial Offices, Factories, Shops

– Collectibles such as Paintings, Coins, Wines, etc however there are strict rules applicable.

There are other alternative asset classes as well you can consider, but each has their own complexity.

The key point is that you do have a genuine wide scope of options when it comes to investing with your SMSF and it is a valid reason why they are so popular.

Most important however is to make sure your investment choices are in alignment with your Retirement Plan, and then tracking how those investments perform on a regular basis.

If you would like to discuss your ideas or would like us to give you an outline of common SMSF investment strategies, pick up your phone and give us a call on 9521-2644.

 

 

Who should be a trustee of the SMSF?

An SMSF has similarities with a trust.  Therefore it’s run by ‘trustees’.

You therefore have a choice between an individual trustee structure (2 to 4 persons), or a corporate trustee structure (1 to 4 persons).

All members are generally either trustees themselves or directors of the corporate trustee.

Trustees cannot be paid for carrying out their trustee duties.

When considering the choice of an individual or corporate trustee structure, there are considerations when it comes to costs, ownership of assets that we suggest reviewing the ATO website page as an excellent, simple summary.

Can I borrow money with an SMSF?

Yes.

There are rules applicable to borrowing with your SMSF, however as a general guide you can use your SMSF to borrow money for your SMSF retirement portfolio.

Where we commonly see SMSF’s borrowing for assets include buying an investment property, or a business premises as well as with shares.

Share investments offer a variety of in-built leveraging instruments such as Warrants or Derivatives, whilst Property investments can simply be borrowing money from a financial institution.

We also have utilised joint venture strategies where you can partner with your SMSF to buy property.

There are plenty of options available for you when it comes to borrowing with your SMSF.  Using leverage can be a powerful wealth accumulation tool over time, but it does come with its risks.

Make sure to seek advice before signing off on any loan or leveraged investment and be very clear on the pro’s and con’s before taking the next step.

 

What obligations do Trustees have with an SMSF?

SMSF trustees, regardless of whether they outsource professional services will ultimately be responsible for the operation of their SMSF.

The duties and obligations required of an SMSF trustee include:

–  Making sure your investments are for the sole purpose of your retirement.

– Creation and adherence to your SMSF investment strategy.

– Keep your SMSF and personal assets separate.
– Comply with the superannuation and tax laws
– Keep your SMSF records updated
– Have an ASIC approved SMSF auditor to audit the SMSF
– Lodge the SMSF’s annual return with the Australian Taxation Office
If you are unsure about whether an SMSF is suitable for you, we recommend reviewing the ASIC moneysmart website

Do SMSF’s require an investment strategy?

Yes.

The ATO Website highlights this requirement.  Your investment strategy needs to include what your investment objectives are for the SMSF, the types of investments your fund can make and we often include the range of asset allocation for each investment type.

You will need to document your strategy and provide it to your auditor.   Keep your SMSF investment strategy updated regularly and particularly if your circumstances change (eg. new opportunities arise or you start a pension, etc).

You also need to include whether the SMSF will hold insurance (eg. life insurance) for each member.  There’s no obligation that you must have insurance, but you do need to document your decision within the investment strategy.

What balance do you recommend to start an SMSF?

There is no statutory minimum for which you need to have in retirement savings so as to open an SMSF.

However the costs associated with both opening the SMSF and the ongoing costs (eg. accountant, auditor, portfolio fees, etc) and even winding up the fund  means that on lower balances then it may not be advantageous to open an SMSF.

For this reason, ASIC recommend a balance of $200,000 or more. 

If you wish to know more about cost effectiveness considerations, we do recommend a read through of this ASIC page to learn more (or call us!).

 

How long does it take to set up an SMSF?

Generally speaking, many accountants or SMSF service providers can establish the SMSF Trust Deed and associated paperwork quite quickly (ie. within a week).

The SMSF does have to register with the ATO within 60 days of formation where an ABN and TFN will be obtained.

We have seen the timing of this process range from a week to a month pending the Australian Tax Office’s availability for processing.

Are there ways in which I can educate myself about SMSF’s?

Yes.  ASIC have a range of free online courses for SMSF Trustees (or prospective ones) to undertake.

We suggest an online course that the SMSF Association offer, and as time goes by, you may wish to consider membership that provides you with ongoing training and webinars.