Given recent ups and downs in the share market, Self Managed Super Funds (SMSF's) have become a hot topic once again. SMSFs allow you to control your Super input and investments more than an Industry Super Fund would. However, it's important to know a little bit more about them before you decide to take the leap.
KNOW HOW A SELF MANAGED SUPER FUND WORKS
The SMSF can have up to 4 members. You and your spouse, for example, can be members of the SMSF. As members, you must also be a trustee. Alternatively, you can set up a company as trustee with you and your spouse as directors of that company.
The trustees of an SMSF ‘control’ the fund and make all the investment decisions. You as a trustee control the money for your retirement. This control gives you the ability to see your financial future more clearly.
The trustees are also responsible for complying with all legal obligations. We recommend that you use a professional accountant that can help you to comply with these obligations to help achieve your goals.
As a trustee, you’re entrusted with the care of the assets for your future. As such, it’s wise to be familiar with the rules, compliance and processes that need to be adhered to. At the end of the day, if you follow the rules, you can enjoy the tax advantages of investing through superannuation.
SO WHAT SHOULD I CONSIDER BEFORE I JOIN A SMSF?
Starting or joining a Self Managed Super Fund is a significant decision, so you should make sure you are fully informed before you make the switch.
- Consult your Accountant. Your Accountant has a good understanding of your current financial standing and the benefits of a SMSF.
- Visit Government websites: these will give you straightforward information on SMSFs and the potential risks and benefits of joining one.
- Have a good understanding of the economy. If you chose to start a Self Managed Super Fund, you alone will be responsible for your investments and losses. If you understand the currant fiscal market prior to changing your Super Fund, you will have a much higher chance of making high returns through your SMSF.
- Make sure you have the time to review your Super. If you start a SMSF, you will be required to manage your own Super. Ensure that you have the free time to coordinate your investments and returns often, otherwise things could rapidly turn south.
- Consider your own stage of life. It is important to consider where your life is and where you may be headed before becoming involved in a SMSF. Your age, income, job stability and family life can all drastically affect the efficiency of a SMSF as well as the lives of any others involved in your Super.
BORROWING FOR AN SMSF
Self Managed Super Funds allow their members to borrow money to invest for potentially higher returns however this can be risky. Borrowing money does allow larger investments, but you are not exempt from the usual Loan conditions including interest rates and late fees, and if your investments fail you can find yourself out of pocket or stuck with rapidly growing interest rates.
“This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs”.