Self-Managed Super Funds are among the fastest growing superannuation vehicles in Australia and they’re not just for older investors – investment savvy Y-Genners are catching on.
According to statistics released by the Australian Taxation Office (ATO), greater numbers of people below the age of 40 are investing in Self-managed Super Funds (SMSFs).
Historically, SMSFs were considered the province of only the rich. However, as set-up fees and running costs decrease, younger people are viewing SMSFs as a viable alternative to industry funds or off-the-shelf retail funds.
A SMSF is a highly-regulated retirement strategy. Every fund requires between one and four members. Each member must be a trustee, or if you appoint a corporate trustee, a director.
SMSFs exist only to provide member retirement benefits. They follow a strict investment strategy designed to meet the needs of those members.
Those best suited to running their own super fund are meticulous about record keeping. Regulatory bodies, including the tax office, maintain rigid reporting guidelines so it’s crucial that records are accurate and kept up-to-date.
Thinking about hopping on board? Here are a few points to consider:
• Start with a lump sum substantial enough to make the fund worthwhile. There is no minimum requirement to establish the SMSF. However you need to consider the running costs.
• Regulations stipulate you engage qualified professionals to handle the accounts, tax, audits and all the legals.
• You will need both time and financial experience. The Australian Securities and Investments Commission (ASIC) recommends you use a qualified financial adviser to help with administration and investment decisions.
• Regulations require that you consider life insurance as part of the fund’s overall strategy. This includes income protection and total and permanent disability cover for all members of the fund.
It is imperative that you seek professional advice because as a trustee or director of the fund, you are personally responsible for all investment decisions.
That said, what are some of the benefits?
• SMSFs offer greater levels of control than retail or industry super funds.
• A wider range of investments and asset types are available to SMSFs.
• Funds can borrow to purchase direct shares or property. (special structures needed).
If you’re still not sure about the best option for your retirement when it still could be 20+ years away, talk to us & ask about SMSFs and other options such as superannuation wrap accounts or small APRA funds (SAFs). These give you more control without the high charges associated with managing a SMSF.
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.