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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.


Take ‘super’ care of yourself

While you’re looking after the kids, who’s looking after you? Find out how to minimise a super shortfall and, better yet, boost your super.

Taking time out of the paid workforce to start a family can make it difficult to accumulate enough super for a comfortable retirement.

According to the Association of Superannuation Funds of Australia a three-year break from the paid labour force, say five years into a career, can lead to an eventual retirement payout of about $27,000 less than it otherwise may have been. 

This partly explains why women are well behind men in super accumulation: The latest figures show that the average retirement lump sum accumulated by a man is $198,000, while the average woman accumulates only $112,600.

But there are ways to avoid this shortfall, while you take time off to raise your kids – even with reduced or no pay.

Paid parental leave
Did you know that many employers provide at least six weeks of maternity leave on full pay, on top of the federal government’s 18 weeks of Paid Parental Leave? Some employers even allow you to extend your parental leave by accepting half pay over a longer period.

If your employer pays parental leave, your 9% super guarantee contribution may continue to be paid into your fund, while you receive parental leave payments – please check with your employer before going on leave.

If you’re planning to take time off, it’s worth checking what will happen with any death and disability insurance cover you currently hold – both inside and outside super.

Super splitting
Another way to boost super balances is for the working partner to split up to 85% of his or her concessional super contributions for that year into the non-working spouse’s super account. You simply need to complete the spouse contribution splitting form and provide it to the trustee of your super fund after the end of the financial year.

Spouse contribution offset
If your spouse has an income of less than $13,800 for a given financial year, you can receive a tax offset of up to $540 by making up to $3,000 in after tax contributions to your spouse’s super account.

Government co-contribution boost               
The government is also happy to help – if you earn less than $61,920 in a financial year, you may be eligible for the government co-contribution. What’s more, if you earn $31,920 or less, the government will match your contributions dollar for dollar up to a maximum of $1,000. So, $1,000 in after tax contributions can effectively boost your super by $2,000.

This co-contribution reduces by 3.3 cents for each dollar you earn over $31,920, phasing out at $61,920. This can be done each year you are out of the workforce, provided you meet the income eligibility requirements.

Go to the Australian Taxation Office (ATO) website at ato.gov.au for more information about how to ensure your personal super contribution counts. In most cases, the ATO will pay your co-contribution amount directly to your super fund.

Don’t forget, if you’ve taken parental leave (and because of time away from work have earned less than the minimum) you may be eligible for government co-contributions.

Added extras
A great way to catch up on your super once you return to work is to sacrifice a set amount from your salary into your super, in addition to any super guarantee contributions made by your employer. This may save you some income tax, because salary sacrifice contributions are taxed at up to 15%, which may be lower than your marginal tax rate, had you taken it as salary and then contributed into super after tax.

Be smart about your investments. Make sure your money is working as hard as it possibly can, based on your attitude to risk and choice of investment time frame. If you’re not sure of the best option for you, call us today.

ABS Survey of Income and Housing, compiled for the Association of Superannuation Funds of Australia (ASFA), 2009-10.

What you need to know
Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning Pty Ltd and other companies within the AMP Group will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.

Is retirement on your radar?

Ease into retirement by moving from working full time to part time and save on tax.

A Transition to Retirement (TtR) pension allows people between age 55 and 64 to access part of their super through a pension while still working. This strategy can be used while working full time or part time and, when combined with salary sacrifice, it can boost your super while providing significant tax advantages.

With a TtR pension you can supplement your part-time income, making it possible to maintain your current lifestyle while working fewer hours. You can withdraw up to 10 per cent of your account balance each year. Plus, as you are still working, you can keep contributing to your super – through your 9 per cent employer super guarantee and/or salary sacrifice.

Income that you receive from a TtR pension is favourably taxed compared to your earned income. If you’re aged 60 and over, the pension income is tax-free and if you’re between 55 and 59, it is taxed at your marginal tax rate and receives a 15 per cent tax offset. This means the maximum tax rate you may be charged is 30 per cent (excluding the Medicare levy).

A TtR pension and salary sacrifice strategy will generally be most effective if you are in a high marginal tax bracket and are salary sacrificing more than you are drawing down from a pension.

If you are salary sacrificing in combination with a TtR pension, it’s important to contribute within the allowed limits to avoid paying excess tax. Until 30 June 2012, the concessional super contribution caps (which include salary sacrifice and super guarantee) for anyone aged 50 or over are $50,000pa. However, it has been proposed, after this date, the amount is reduced to $25,000pa. Any excess over the cap will effectively be taxed at the top marginal tax rate.

An added benefit is that if you decide that part-time work is not for you and choose to go back to work full time, there is flexibility to stop this type of pension and revert to simply accumulating your super.

Case study

David, age 60, cannot afford to retire but would like to reduce his workload – from 40 hours a week down to 27 hours a week – for a combination of family and health reasons. His annual salary will reduce from $60,000 to $40,000. David has $200,000 (all taxable component) accumulated in his super account.

As David would like to maintain his present level of net income (i.e. $60,000pa), he could use a TtR pension to meet his income shortfall.

Let’s compare the impact that David’s partial retirement will have on his income position.



Before                          After

Annual salary                                       $60,000                         $40,000

Gross assessable
                                                 $60,000                         $40,000

Income tax1                                                                                    ($12,150)                       ($5,050)

TtR allocated pension income              -                                   $12,900

Take home pay                                     $47,850                         $47,850

Net hourly rate of pay                           $23                               $34

1 Includes the Medicare levy, but excludes the flood levy which only applies for the 2011-12 financial year.

As you can see, the tax-effectiveness of a TtR strategy has enabled David to maintain his net income, by meeting his income shortfall of $20,000 with only $12,900 from his super, after reducing his hours of employment.

Retirement income strategies can be complex. For instance, if you use part of your super to access a TtR pension, this may impact your future lifestyle. So speak to us about what you can do to increase future retirement income, as well as to find out more about how you could ease into retirement with a TtR pension.


What you need to know

This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning and other companies within the AMP Group will receive fees and other benefits, which will be a percentage of the premium you pay and/or the advice fee you agree with us. Some of the information in this article is based on our interpretation of the law. It is a summary of the subject matter covered and is not intended to be comprehensive tax or financial advice. No reader should act on the basis of this article without obtaining specific professional advice. Further details are available from us, or AMP Financial Planning Pty Limited on telephone 1300 157 173.