What is a Self Managed Superannuation Funds (SMSFs)?
SMSF's are sometimes referred to as 'do it yourself' super funds are funds established by the members of the fund. In recent years SMSFs have become increasingly popular. While establishing an SMSF can give you greater control and flexibility when planning for your retirement, they also have extensive administrative and compliance requirements.
Unlike a retail or industry super fund members of an SMSF are also the trustees of the fund or directors of a corporate trustee. This means that they have the additional responsibility to ensure that there is an appropriate investment strategy in place for their fund and they are also required to manage the payment of benefits.
So if they are more work why do people choose SMSFs'?
Although the ongoing requirements of a SMSF mean more work for you as the trustees, many people believe the benefits of having an SMSF far outweigh this additional work.
What are some of the advantages of an SMSF?
> Investment Choice - one of the key drivers behind establishing SMSFs has always been due to the much wider investment choice available, such as
direct property, shares and hedged funds.
> Increased control over your retirement funds and how they are invested - you can have more sophisticated investment strategies in place.
> Tax Control - control and flexibility that trustees have over the tax position of the fund. Through either strategic investment planning (such as
maximising franking credits) or internal structuring, tax can be significantly reduced (and in some cases, totally eliminated with refunds paid from the
ATO), particularly for those in retirement. .
> Estate Planning - Your Will does not necessarily control your superannuation benefits. With an SMSF The key here is that you can create a strategy to
accomplish exactly what you are after, with exceptional tax efficiency and to effectively look after child beneficiaries in a way that no
other structure can match. You also have the ability to create Binding Nominations that do not lapse.
> Borrowing - You can now under some circumstances borrow money to invest within an SMSF this is particularly useful when wanting to
hold direct property investments within an SMSF.
> Portability - they are able to move with you from job to job.
> Pension Planning - SMSF's provide increase flexibility when drawing an income stream, they also provide a seamless transition from accumulation to
pension phase.
What are some of the disadvantages of an SMSF?
> Time burden - the addtional reporting responsibilities required by the trustees mean that SMSF's are a lot more onerous and time consuming as you
are essentially 'doing it yourself' as opposed to operating through a public offer or industry fund who do the administration for you.
> Risk of Non-Compliance - The penalties for trustees for non-compliance with the Super rules are some of the most brutal that exist. The ONLY trustees
that are appropriate are those that are willing to adhere to a zero tolerance policy of compliance with all SIS laws.
>Trustee awareness and skills -Establishing a SMSF means that you are the trustee of the fund (or a director of the company that is a corporate trustee),
and hence you need to be ready and able to take on the responsibilities of being a super fund trustee. Trustees are legally responsible for all the
decisions made in a SMSF, for running the fund and getting end of year admin and audits completed, and even though you can get professional help,
you are still ultimately responsible for complying with the SIS Act. You are also responsible for creating an investment strategy, and adhering to it.
> Costly for small accounts - SMSFs are not usually cost effective for accounts smaller than $200,000. It is important to note though that the larger the
account value the more cost effective and cheaper SMSFs become relative to retail funds.
What services in relation to SMSF's does Investwest provide?
Unlike a retail or industry super fund members of an SMSF are also the trustees of the fund or directors of a corporate trustee. This means that they have the additional responsibility to ensure that there is an appropriate investment strategy in place for their fund and they are also required to manage the payment of benefits.
So if they are more work why do people choose SMSFs'?
Although the ongoing requirements of a SMSF mean more work for you as the trustees, many people believe the benefits of having an SMSF far outweigh this additional work.
What are some of the advantages of an SMSF?
> Investment Choice - one of the key drivers behind establishing SMSFs has always been due to the much wider investment choice available, such as
direct property, shares and hedged funds.
> Increased control over your retirement funds and how they are invested - you can have more sophisticated investment strategies in place.
> Tax Control - control and flexibility that trustees have over the tax position of the fund. Through either strategic investment planning (such as
maximising franking credits) or internal structuring, tax can be significantly reduced (and in some cases, totally eliminated with refunds paid from the
ATO), particularly for those in retirement. .
> Estate Planning - Your Will does not necessarily control your superannuation benefits. With an SMSF The key here is that you can create a strategy to
accomplish exactly what you are after, with exceptional tax efficiency and to effectively look after child beneficiaries in a way that no
other structure can match. You also have the ability to create Binding Nominations that do not lapse.
> Borrowing - You can now under some circumstances borrow money to invest within an SMSF this is particularly useful when wanting to
hold direct property investments within an SMSF.
> Portability - they are able to move with you from job to job.
> Pension Planning - SMSF's provide increase flexibility when drawing an income stream, they also provide a seamless transition from accumulation to
pension phase.
What are some of the disadvantages of an SMSF?
> Time burden - the addtional reporting responsibilities required by the trustees mean that SMSF's are a lot more onerous and time consuming as you
are essentially 'doing it yourself' as opposed to operating through a public offer or industry fund who do the administration for you.
> Risk of Non-Compliance - The penalties for trustees for non-compliance with the Super rules are some of the most brutal that exist. The ONLY trustees
that are appropriate are those that are willing to adhere to a zero tolerance policy of compliance with all SIS laws.
>Trustee awareness and skills -Establishing a SMSF means that you are the trustee of the fund (or a director of the company that is a corporate trustee),
and hence you need to be ready and able to take on the responsibilities of being a super fund trustee. Trustees are legally responsible for all the
decisions made in a SMSF, for running the fund and getting end of year admin and audits completed, and even though you can get professional help,
you are still ultimately responsible for complying with the SIS Act. You are also responsible for creating an investment strategy, and adhering to it.
> Costly for small accounts - SMSFs are not usually cost effective for accounts smaller than $200,000. It is important to note though that the larger the
account value the more cost effective and cheaper SMSFs become relative to retail funds.
What services in relation to SMSF's does Investwest provide?
- Determine if a self-managed superannuation fund (SMSF) is an appropriate investment structure for you.
- Establish your self managed superannuation fund and arrange for a trust deed to be prepared and a Tax File Number and ABN are registered for the SMSF.
- Prepare and review your fund’s investment strategy taking into account your risk profile, income tax minimisation and estate planning preferences and possibilities.
- Assist you transferring your benefits from your existing superannuation funds or overseas pension accounts into your self managed superannuation fund.
- Help you minimise tax and maximise your superannuation contributions
- Arrange pensions and lump sum payments from your SMSF.
- Keep you informed of changes to relevant legislation and its impact on your self managed fund.
- Refer you to an experienced SMSF administrator.
