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Tuesday, 25 September 2012 17:19

Want to manage your own super?.

Written by  Jacqui
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Want to manage your own super?

Considering the ins-and-outs of self-managed super can help determine whether you should manage your own super or not.
An increasing number of Australians are looking for greater control over their super. There are more than 450,000 Self-Managed Superannuation Funds (SMSFs) with assets totalling over $400 billion – making up one-third of the 1.34 trillion-strong superannuation industry in Australia.1

But is a SMSF for you?

Pluses and minuses

It is all about control and flexibility – with a SMSF you are in charge of your super.

Among the benefits is access to a wide variety of investment strategies and assets, including direct residential and commercial investment property. And as you control what to invest in – and when to buy or sell-out of these investments – you gain more control over your fund’s tax position. You can also have more estate planning control through your SMSF that may not be offered through some public offer super funds.

However, with greater control comes greater responsibility. While you may want more flexibility and control over your super, it takes time, sufficient assets, investment and legislative expertise or advice, and ongoing involvement to manage a SMSF successfully.

A few thoughts…

The costs
Costs can vary depending on any additional investment, accounting, tax, auditing and legal advice or support you use to manage your SMSF funds. Generally, you will need to have a fund with around $200,000 to make it worthwhile, and a median-sized fund would cost around $2,000 each year.2

SMSFs with balances over $200,000 can be more cost-effective, especially when expenses can be averaged across up to four members.

Insurance usually costs more in an SMSF. Public offer funds can buy group policies and provide cheaper rates, but individuals typically pay more for illness, injury and death cover in their own fund.

Being a trustee
By establishing a SMSF, you become the trustee of the fund, and this makes you legally responsible for:

running the fund
making all decisions in the fund
ensuring the fund’s reporting, auditing and administration obligations are met.
It is important to remember that even though you may outsource some of the above tasks to professional advisers, you hold ultimate legal responsibility and accountability for your fund.

Investment management
A common reason for starting a SMSF is to have access to a wider choice of investments, particularly direct property. A SMSF allows you to invest in direct residential or commercial property and borrow the funds to do so. It also allows you to invest in collectables. However, the assets and money in your fund must be used solely to benefit your retirement and extra rules apply to collectables.

To manage your super assets, you should be confident in your level of investment skill and knowledge or obtain advice. You will need to document the fund’s investment strategy and should consider:

the amount of time you will need to spend managing your own super
how long your fund will be in the accumulation phase vs the retirement phase
the level of risk you and any other fund members are comfortable with
the objectives of your fund.
The investment strategy needs to take into account the age, personal circumstances and risk tolerance of each fund member. The strategy also needs to suit everyone in the fund, including members at different life stages.

The trustees should document every investment decision appropriately and maintain clear records of any subsequent investment changes.

The right advice
Although you may want to ‘do it all yourself’, if you lack the time or skills to manage the many SMSF trustee-related responsibilities, you risk making costly decisions that could seriously hamper your retirement plans. That’s why many SMSFs engage professional advisers such as financial planners, tax agents and accountants to not only help manage their responsibilities effectively, but also maximise any investment and taxation opportunities.

Bernard Fehon is a SMSF advice specialist, who will consider your personal situation and needs to help you decide if a SMSF is, firstly, right for you. If it is, he can help to establish your fund and structure a suitable investment strategy and investment products for your fund.

Time to decide

Before establishing your own super fund, it is vital to understand what is involved and whether you are suited to running a SMSF. So, take some time to think about these points before making a final decision. 

Please speak with  your financial planner or accountant to see if a SMSF is right for you. Alternatively, you can call us at Tactical Solutions to discuss your options.

 

1 Australian Taxation Office. (April 2012). Self-managed superannuation funds: A statistical overview. Retrieved from ato.gov.au.
2 Australian Taxation Office. (November 2011). Thinking about self-managed super. Retrieved from ato.gov.au.

“Before establishing your own super fund, it is vital to understand what is involved and whether you are suited to running a SMSF.”  

Any advice in this document is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on this advice, you should consider the appropriateness of this advice having regard to those matters and consider the Product Disclosure Statement before making a decision about the product. AMP Life is part of the AMP group and can be contacted on 131 267. If you decide to purchase or vary a financial product, AMP Life and/or other companies within the AMP group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.


 

Last modified on Tuesday, 25 September 2012 17:28

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