Should you have a Self Managed Super Fund (SMSF)
The Australian superannuation industry is worth billions of dollars. In fact Australians have $1,300 billion dollars saved in public and industry super funds.
This means there are a lot of professionals, consultants, advisors and other players involved in the super industry making billions of dollars a year in fees from your savings.
These people make these fees regardless of whether they make profits from your super savings or not.
So not only do you have to contend with the fact that in an economic downturn you will in all probability make a loss from your super savings but you also have to pay the professional advisors and fund managers fees for the privilege of them losing your money.
Also realise that the superannuation laws are very complex and involved. Everything to do with running a super fund is over-regulated by government.
And fund managers and professional advisors love this over-regulation. That is because to them it means that people will pay more fees to keep things compliant. They also know that superannuation members will be to afraid of starting their own super funds the more regulated super becomes.
So that brings us to other alternative, what else can be done?
That alternative is a Self Managed Superannuation Fund. SMSF for short.
You are able to start and run your own super fund. This is quit legal and allowable. By doing so you then become the master of your own destiny. You have full control of your own savings. You can invest your own savings in the best way you see fit and change the investments whenever you like.
You may ask ‘how can I run a super fund’.
It ceases to amaze me why more people in Australia do not run and manage their own super. Most Australians are happy enough buying a residential rental property and running it themselves as an investment. It’s an Australian national pastime. Nobody baulks at doing this.
‘The rental property is for my retirement.’ people say.
Well why not do the same with super as it is for your retirement, it can only be for your retirement. Once you understand that, then you can run your own super fund just as easily as you can buy and run an investment property.
These are some of the advantages of a SMSF to consider;-
• Self managed super funds provide you with the opportunity to reduce income tax on investment income and capital gains;
• Self managed super funds Increase the flexibility of investment choices and the asset selection;
• Self managed super funds provide control over your total investment portfolio, with the ability to take account of the risk profile of all your assets, including those held outside superannuation;
• Self managed super funds have between 1- 4 members in the fund and allow the pooling of resources of others with similar financial objectives (for example, a family unit);
• Self managed super funds provide maximum flexibility in relation to the usage of pension streams;
• Self managed super funds provide increased flexibility to use the advantages superannuation offers for those people trying to access Centrelink benefits such as the age pension;
• Self managed super funds give you the ability to transfer personally owned shares and other listed securities directly into superannuation; and
• Self managed super funds also give you the ability to own your business’ real property (but not operating assets) in the superannuation fund, assisting funding and cashflow problems for many businesses.
You can see that a SMSF is great to have to hang off your business. Many tax planning and investment strategies can be incorporated within your business with the help of your super fund. E.g. your super fund owns your business premises.
You use your SMSF to your advantage and profit, not for fund mangers and professional advisors advantage and profit, at the expense of your savings.
But you don’t have to be in business to have a SMSF. You can create and run one even if you are an employee working for the boss. You have the choice of where your employer superannuation contributions go and it can be to your own SMSF.
The one drawback is you still have to meet the compliance rules and lodge a tax return for the SMSF. This means you will need an Accountant and an Auditor each year.
A Typical cost for the yearly accounting and auditing work is between $2,000 to $3,000 for a standard SMSF. Standard being a SMSF investing in the common investment types like bank interest, shares and property.
Your SMSF would need over $250,000 to make this cost more cost effective than the fees you pay to fund managers. That is the only drawback.
In conclusion I would advise anyone who has over $250,000 in super (that can be aggregated for the family, e.g. husband and wife and working kids into one SMSF) consider rolling it into their own SMSF.
Become pro-active in managing your own retirement benefits.
Tony Marchei is the principal of AXXO Accounting & Mnagement, an accounting firm located in the norther suburbs of Perth, Western Australia.
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