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Self-Managed Super Funds
In recent years there has been an explosion in the number of Self Managed Superannuation Funds (SMSF) in this country. With more than $520 billion under management, SMSFs are now the largest and fastest growing segment of Australia’s $1.7 trillion superannuation industry. That figure has tripled in the last five years and as at November, 2014 there are 539,375 self managed super funds in Australia.
What is a SMSF?
Your SMSF must have its own bank account and a trust deed. The deed is basically the rules of operation and sets out who can be a member, how they’re admitted as a member, what the fund can invest in and who can receive a death benefit. Your own SMSF requires an annual audit plus they need to lodge a tax return with the Australian Taxation Office (ATO).
Establishing your own self managed superannuation fund is a very important financial decision but before you decide to go down this pathway you need to know the costs and understand your legal obligations. While managing your own SMSF can offer many benefits, they are subject to considerable compliance and regulation.
One of the primary reasons why self-managed superannuation funds have grown in popularity in recent years is the fact the members have greater control over the range of investments, the ongoing management fees and ultimately their tax payable.
When contemplating the establishment of your own self managed superannuation fund you need to weigh up the advantages and the added responsibilities. For many Australians, SMSFs offer four major advantages:
1. More control over your investments
2. Greater investment flexibility
3. Generally lower fees than industry and retail funds
4. Potentially better performance than industry and retail funds
Having a SMSF lets you take full advantage of tax and superannuation law changes as soon as they come into effect. They also provide families with a vehicle to pool their resources and grow their wealth together. You can effectively transfer wealth between generations and these estate planning benefits may not be available through conventional superannuation products.
A SMSF arguably offers even more tax benefits when you consider the ability to segregate accounts and share imputation credits. Finally, your own SMSF also provides portability because your account stays with you wherever you go provided you remain within the framework of Australia’s superannuation laws.
More Control & Flexibility
As a trustee of your own SMSF, you can control where your retirement savings are invested. Compared to ‘off-the-shelf’ superannuation funds, you have a wider choice of investment options including listed shares, bonds, listed investment companies (LICs), exchange traded funds (ETFs) and direct property. You can also transfer personally owned listed shares and managed funds directly into your SMSF plus they can own ‘business real property’ (property used wholly and exclusively for business).You can devise your own investment strategy, actively manage the range of investments and adjust your portfolios as markets change.
Lower Management Fees
Unlike retail and industry based superannuation funds, the members of a SMSF (up to 4 and usually family members) can combine their assets to accumulate retirement funds. This can provide a more cost effective outcome because a SMSF with pooled assets in excess of $200,000 can generally reduce the average cost of managing the fund to below 1.0% per annum.
The Commonwealth Government report, ‘A Statistical Summary of Self-Managed Superannuation Funds’ released in December 2009 (based on ATO and APRA data) found that SMSF members generally paid lower fees in the 3 year period to June 2008. The report also indicated that on average, SMSF investments performed better than all other super funds over the same period.
A SMSF offers the members a number of tax concessions including:
- They have a flexible structure so members can take advantage of estate planning opportunities to effectively transfer wealth from one generation to the next with minimum tax exposure. They also offer maximum asset protection at the same time
- Earnings in your SMSF are taxed at the concessional rate of 15%
- Capital gains on investments held in your SMSF are taxed at an effective rate of 10% if they are held for longer than 12 months
- Unlike many industry and retail super funds where the 15% contributions tax is deducted when the contribution is paid into your superannuation fund, contribution tax payments in a SMSF are deferred until after lodgment of the annual tax return
- Maximum flexibility in establishing and managing pensions, including account based, transition to retirement and term allocated pensions
- Greater flexibility for accessing Centrelink benefits such as the Age Pension
Establishment & Administration of Your SMSF
The administration and compliance of your SMSF is very important. We can help you with:
Establishment - including all the requisite forms and paperwork to establish your SMSF. You can then administer the fund yourself or you can use our SMSF administration service. The steps generally involved in setting up a SMSF include:
- Obtaining a Trust Deed
- Appointing Trustees with each Trustee to sign a ‘Consent to Act’ Form
- Each Trustee to sign the ATO Trustee Declaration
- Electing to become a Regulated Fund - Trustees must elect to be ‘regulated’ under SISA to receive concessional tax treatment within 60 days of establishing the SMSF.
- Obtaining a Tax File Number (TFN) and Australian Business Number (ABN)
- Establishing a separate Bank Account for the SMSF to ensure that money belonging to the SMSF is held separate from accounts of the members, trustees and related employers. This is a SISA requirement but also helps SMSF trustees to preserve and protect their retirement income.
- Preparing and implementing an Investment Strategy for the SMSF
Our service offering includes all of these functions including:
- Preparation of your SMSF Trust Deed
- Completion and Lodgment of all the ATO Application Forms
- Providing Trustee Declarations – Note that under the SIS Act, Trustees must consent in writing to their appointment and all new SMSF Trustees (and Directors of Corporate Trustees) must sign an ATO Declaration confirming that they are aware of their duties and responsibilities. This is required within 21 days of becoming a Trustee or a Director of a Corporate Trustee
- Establishment of a Bank Account in the name of the SMSF
- Completion of binding death nomination forms that provide guidance on how members want their assets distributed in the event of their death
Administration - we can assist you with the ongoing administration of your SMSF including:
- Managing all the ongoing paperwork for your SMSF
- Preparing the Annual Financial Statements for your SMSF
- Preparation and lodgment of the annual Income Tax Return and Regulatory Returns
- Preparation of requisite Minutes of Meetings
- Maintaining the Asset List for your SMSF
- Arrange the Annual Audit of your SMSF
- Preparation of the paperwork to start and administer Pensions within your SMSF
SMSF Investment Strategy
SMSF Trustees must prepare and implement an investment strategy for the fund. All investment decisions must be in accordance with that strategy and it should be regularly reviewed. It must reflect the purpose of the fund taking into account:
- Investing to provide sufficient member returns (factoring in the investment risk)
- Appropriate diversification and the benefits of investing across various asset classes (i.e. shares, property, fixed interest) in a long-term investment strategy
- The ability of the SMSF to pay benefits to members as they retire and pay other costs incurred by the SMSF
- The age, income, employment and retirement needs of the members
How We Can Help You …
The establishment and ongoing maintenance of your SMSF can be both complex and time consuming. We offer you a range of tailored accounting, administration and compliance solutions including:
- Administration Services – We can assist you with the administration of your SMSF including all the paperwork. In addition, you have access to our technical team who are responsible for compliance with all the current superannuation legislation
- Ongoing Investment Advice - You have access to a professional advisor who will assist you to grow and monitor the investment portfolio. While you have complete control over your portfolio, your advisor will provide pro-active advice regarding financial strategies, estate planning, wealth protection and property investment
- Access Current Information - We closely monitor changes to SMSF landscape and the regulations so you have access to current information at all times so you can make informed investment and tax planning decisions
- Where necessary, we can also provide a 'repair' service to bring your current fund up to date and satisfy compliance requirements
- Wind up your SMSF where required
If you're looking to build your wealth on the back of a tax effective strategy like a SMSF we invite you to book a free, one hour introductory consultation to discuss your needs. You'll get practical business, tax and financial advice designed to help you build your wealth. To book a time, contact us today on (03) 5443 8888 or complete your details in the box at the top of this page.