Posted , October 3, 2016.

Financial freedom in retirement should be one of your goals, no matter how young you still may be. It’s simply prudent to save for the future as this is without a doubt an important factor in ensuring your welfare as a retiree.

It really behoves you to explore your options as early as you can so you can get started on a program for funding your retirement while you have plenty of time and means to do so. Your choice will probably depend on the level of responsibility you’re willing to take on. If you want more control over your retirement investments, consider setting up a self-managed superannuation fund.

WHAT IS A SELF-MANAGED SUPER FUND (SMSF)?

An SMSF is an investment portfolio that allows you to take the do-it-yourself approach in saving for your retirement. This means that the members of an SMSF are also the trustees and they have the freedom to run it in the manner they deem to be most beneficial to them.

If an SMSF appeals to you, you can set one up for yourself, making sure you adhere to the strict regulations of the Australian Taxation Office. You may do it on your own or with one to three more members besides yourself.

WHAT BENEFITS WILL YOU GAIN FROM AN SMSF?

As mentioned, you have greater control and enjoy better flexibility over your investments. You and your fellow trustees get to decide what to invest in and how to operate the fund. The same applies when it comes to picking the right insurance policy to suit your situation.

Cost could be another benefit, depending on the size of the fund. Account-keeping fees are fixed instead of percentage-based. An SMSF also has the advantage of being tax efficient with the option to make longer-term investments that allow you to negotiate for lower rates.

You have the option to leverage your SMSF to invest in property. This allows you to diversify your investments. You can also employ strategies that allow you to hold commercial premises in super if you own a business.

This fund is effectively a trust that can serve as a family wealth mechanism which you can pass on through the succeeding generations in your family.

HOW CAN YOU GET AN SMSF DONE RIGHT?

Running your own fund can be a complex process. The best way to ensure that you’re doing it correctly is to engage the services of a super fund accountant. Assistance from such a specialist involves ensuring that you meet all pertinent legal obligations and determining that your fund keeps within its purpose of providing you with financial security when you retire. You get guidance and analysis without you ever relinquishing control.

HOW CAN YOU MANAGE YOUR SMSF ON AN ONGOING BASIS?

To make sure that your SMSF is consistently managed, hire a super fund accountant to regularly monitor it so that you can be certain that you are not breaking the rules, that you’re keeping up with costs and fees, and that your fund is essentially doing what it is supposed to do.

IS AN SMSF RIGHT FOR YOU?

An SMSF isn’t for everybody, so it’s best to consult an expert before deciding to go for it. Will the benefits apply to you? Do you have the time and skills necessary to make it work for you? Is it the most cost-effective option for you? These are just some of the points to consider.

WHAT ARE THE COSTS, BOTH UPFRONT AND ONGOING?

For individual trustees, the upfront cost should be around $800 to $1,000. For corporate trustees, it’s no more than $2,000. Ongoing fees include account keeping fee, audit fee, and ASIC fee (if you’re a corporate trustee). Simple funds shouldn’t run higher than $2,000 per year. More complex funds cost around $2,500 to $3,000 a year. These cover the base cost. There may be additional costs as well.

HOW CAN YOU BUILD WEALTH WITH AN SMSF?

An SMSF can be an integral part of your overall wealth plan and be used for estate planning, for making additional investment, for ASIC protection, etc. It should be combined into your overall wealth-building strategy.

A self-managed super fund is an effective financial vehicle for funding your retirement. If you would like to set up your own SMSF, contact our super fund accountant at (03) 9587 9747 to find out more.

Posted , August 14, 2015.

ATO Targets for 2015If you already follow your own superannuation fund closely, you may find the additional control that you get running a SMSF to be more satisfying, but it will take time and there are ongoing costs. There’s an investment in time required at the outset to understand the legal and regulatory requirements, as well as an analysis of your finances to see if a SMSF is right for you. And an interest in investment is also helpful. Whilst direct property is one of the most popular SMSF categories, direct shares and cash can round out a personal superannuation portfolio.

Running a SMSF can be time-consuming. Firstly, you need an investment strategy with a plan that’s reviewed periodically to make sure it’s achieving the value you plan to take into retirement. Then you need to make sure you have enough capital and lastly, the time to run your SMSF, whether you administer the fund or place it in the hands of experts.

Lifestyle and You

Developing a strategy can help you determine how – and with whom – you invest in and share your SMSF. Year on year, three asset classes out-perform all others: direct property, cash and direct shares. There are a number of ways to consider and select your investments and there’s really no limit to your options.

You may want to consider your interests before establishing a fund. If you have a medical practice, investing in devices or pharmaceutical shares could be a natural fit for your SMSF. If you’re also interested in renewables or health, looking at shares in these categories will make it easier to stay on top of your investments from day to day.

Time, skills and costs

Running a SMSF requires more time than an industry super fund. You can run a SMSF with up to three others which can give you a broader interest and skills base to draw on as well as a wider interest in investment types. Keeping a close eye on the performance of your industry super fund is a fairly good indication of an ongoing interest in a SMSF.

Firstly, you’ll need capital to start a SMSF, which you can provide yourself, or with up to three other investors. An initial investment under $100,000 isn’t going to be very cost-effective, with set up and operating expense fees consuming up to 10% annually, However, if you have more than $100,000 and are prepared to undertake some of the administrative and investment functions, a SMSF is the most competitive superannuation solution.

You’ll then need an investment strategy, as well as legal and financial advice to ensure you comply with laws pertaining to establishing and operating a SMSF. The administration and investment functions can be performed by the SMSF investors themselves, which include the preparation of an annual tax return for your fund, amongst other functions. Depending on your initial investment, you can spend anywhere from 1-10% of your initial capital to set up your fund.

There are also fees associated with your annual return, insurance for the members of the fund and administrative costs. The annual operating expense ratio (OER) of a SMSF is generally under 1%, but can be as low as 0.25%.

After all is said and done, you may find the set up fees and ongoing costs outstrip the benefits, but without a thorough account of your current situation and a SMSF, it’s difficult to determine what’s right for you.

Personalised advice for your needs

If you’re in the early stages of your career and have a small amount of equity saved, it may be worth considering setting up a SMSF to build wealth more quickly with a partner or up to three others, whilst at a more mature stage in your career, you may be looking for the security a source of revenue can provide in your retirement.

Tailoring a solution to your needs requires an understanding not only of your life stage, but the life path you’re following. If you intend to change careers at some stage, travel for an extended period or leave the workforce to start a family, you need to talk to a professional for advice to help help you to consider all the events in your life that can determine the Superannuation investment strategy that best suits you.

Wealth creation starts with small steps and great advice

We have practitioners who are experienced in running their own SMSFs who can provide first-hand insights into the peaks and pitfalls as well as the expertise to administer a fund for you.  If you have any questions about SMSFs, please don’t hesitate to call one of our SMSF experts to address your concerns.