SMSF – Would it suit you?

Managing one’s own private superannuation fund (SMSF) may appeal to those individuals with at least $200,000 in superannuation, who have the know-how to make investment decisions and who wish to be more directly involved with investing their life savings. A SMSF differs from a professionally managed industry fund because you, as trustee, are responsible for making all the investment decisions.

There are benefits to having control over your own retirement finances, including being able to understand your investments, choosing a wider range of investments that are accessible to SMSFs, maximising your SMSF’s tax position and reducing costs to manage your SMSF.

So, you have decided to manage your own SMSF…

You have choices. You either engage a financial adviser and work with them to decide what investments your SMSF should hold or you make all the decisions on your own. An adviser may help you articulate your financial goals and assist in formulating an appropriate investment strategy for your funds. Once invested, your portfolio needs ongoing management and reviewing to ensure it remains relevant to market conditions and to your goals. For a SMSF to be compliant, you will be required to keep records of all transactions and accounting matters.

Investments

You have a wider choice of investments under a SMSF. For example, you might invest in areas you already know well, such as direct shares and personal assets, such as artworks and property. Property is a key investment consideration for SMSF trustees because business owners may invest in their premises through their SMSFs, enabling them to lease those premises back to their businesses and thereby generate income and release capital at the same time.

Compared with a traditional industry fund, a SMSF may also borrow money to invest, giving you more flexibility. Rules allowing the borrowing of money by SMSFs mean more diversity of investments – earlier in a lifetime or greater in initial value – is possible with a SMSF.

Taxation

You could benefit from a material impact on your total retirement finances by exploring and taking advantage of a myriad of tax strategies specific to SMSFs.

You, with your financial adviser, can design your SMSF to benefit from tax efficiencies, such as interest deductions from borrowing money; tax-free thresholds in the SMSF Pension Phase; asset segregation inside and outside of your SMSF for a balance that gives you possible access to benefits like the Commonwealth Seniors Healthcare Card or even some Aged Pension.

Costs

Having your own SMSF means you can cut investment costs, especially when transitioning from Accumulation Phase to Pension Phase because you will not need to sell down your assets which invariably incur selling fees and/or taxes. Instead, you may more simply retain your investments upon retirement and enter a Transition to Retirement Income Stream (TRIS).

There might, however, be costs associated with managing your SMSF, such as costs for appropriate insurances, accounting, auditing and financial advice. Your accounting and administration teams will also play a key role in ensuring compliance and legal requirements of an SMSF are met.

Benefits of a SMSF…

Now, you can see the possible benefits of managing your own SMSF are more:

• Control of your assets and investment outcomes
• Freedom to design its structure and develop its strategy
• Tax-efficiencies
• Cost-effectiveness
• Seamless transition to retirement phase
• Flexibility to pass on wealth

It is important to know that you, as trustee, are solely liable for the outcomes of your financial decisions for your SMSF. There is a risk that your investment strategy will not deliver the returns on investment that you planned or hoped, so it is highly advisable that you seek advice from a certified professional finance advisor.

How can YML help?

Talk to our YML Super Solutions Team today to see how YML Group can assist you with your SMSF. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website.