 | It’s no coincidence that interest in selfmanaged superannuation has skyrocketed since the global financial crisis (GFC). The loss of investor confidence in superannuation fund managers combined with the lure of controlling your own financial destiny has seen an explosion in the number of Self Managed Super Funds (SMSF) in this country. |
With almost $408 billion under management, SMSF’s are now the largest and fastestgrowing segment of Australia’s $1.28 trillion superannuation industry. That figure is triple what it was just five years ago. As at September 2010, there were about 434,000 DIY funds with more than 830,000 members. This means that less than 3%of the 32 million superannuation accounts in Australia are in a SMSF but they own almost a third (31.9%) of all the assets.
One of the key motivators for moving to self-managed super is greater control. Your own superannuation fund provides members with control over the range of investments, the management fees and the tax bill. They offer a wider choice of investment options compared to ‘offtheshelf’ super funds including corporate bonds, managed investments, listed shares, listed investment companies (LIC’s), exchange-traded funds (ETF’s) and direct property.
Flexibility is another key benefit of a SMSF. Apart from the wider choice of investments, your account stays with you wherever you go provided you remain within the framework of Australia’s superannuation laws. You can transfer personally owned listed shares and managed funds directly into a SMSF and they can own ‘business real property’ (property used wholly and exclusively for business). SMSF’s also let you take full advantage of tax and super law changes as soon as they come into effect and they arguably offer even more tax benefits when you consider the ability to segregate accounts and to share imputation credits. They provide families with a way to pool their resources, grow their wealth together and transfer wealth between generations. These benefits are not available through conventional superannuation products.
Who Should Have One?
You should only consider a SMSF if you’re attracted to the key benefits of control, flexibility and the tax advantages. Remember, if you have a SMSF you are also responsible for the administration and you must ensure that any funds in your SMSF are invested for the ‘sole purpose’ of accumulating savings for retirement. Given a SMSF is run by related parties, the funds can’t be used for your personal benefit but most breaches of the rules relate to acquiring assets from members or relatives, buying the wrong assets, getting the fund's money confused with their own and providing financial assistance to members and relatives. These are serious transgressions that carry heavy penalties.
To be successful you also need a sound investment strategy and we are often asked what sort of balance is required to set up a SMSF? Research suggests one in four funds have a balance of more than $1 million and a further 25% have assets of between $250,000 and $550,000. Only one in seven funds in the research done by Russell Investments had less than $250,000 in assets. This supports the $200,000 figure proposed by the Federal Government as a minimum level for an economically viable self-managed fund.
This is just the tip of the iceberg when it comes to SMSF’s but you don’t have to know everything about SMSF’s to have one. It is one of our specialist areas and if you are looking to establish your own fund call us today
One of the key motivators for moving to self-managed super is greater control. Your own superannuation fund provides members with control over the range of investments, the management fees and the tax bill. They offer a wider choice of investment options compared to ‘offtheshelf’ super funds including corporate bonds, managed investments, listed shares, listed investment companies (LIC’s), exchange-traded funds (ETF’s) and direct property.
Flexibility is another key benefit of a SMSF. Apart from the wider choice of investments, your account stays with you wherever you go provided you remain within the framework of Australia’s superannuation laws. You can transfer personally owned listed shares and managed funds directly into a SMSF and they can own ‘business real property’ (property used wholly and exclusively for business). SMSF’s also let you take full advantage of tax and super law changes as soon as they come into effect and they arguably offer even more tax benefits when you consider the ability to segregate accounts and to share imputation credits. They provide families with a way to pool their resources, grow their wealth together and transfer wealth between generations. These benefits are not available through conventional superannuation products.
Who Should Have One?
You should only consider a SMSF if you’re attracted to the key benefits of control, flexibility and the tax advantages. Remember, if you have a SMSF you are also responsible for the administration and you must ensure that any funds in your SMSF are invested for the ‘sole purpose’ of accumulating savings for retirement. Given a SMSF is run by related parties, the funds can’t be used for your personal benefit but most breaches of the rules relate to acquiring assets from members or relatives, buying the wrong assets, getting the fund's money confused with their own and providing financial assistance to members and relatives. These are serious transgressions that carry heavy penalties.
To be successful you also need a sound investment strategy and we are often asked what sort of balance is required to set up a SMSF? Research suggests one in four funds have a balance of more than $1 million and a further 25% have assets of between $250,000 and $550,000. Only one in seven funds in the research done by Russell Investments had less than $250,000 in assets. This supports the $200,000 figure proposed by the Federal Government as a minimum level for an economically viable self-managed fund.
This is just the tip of the iceberg when it comes to SMSF’s but you don’t have to know everything about SMSF’s to have one. It is one of our specialist areas and if you are looking to establish your own fund call us today
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