Story Wealth Management are a boutique firm, with an award winning team of highly-skilled financial planners, and a close-knit support team based in Hawthorn. We are united in our concern for our clients’ financial wellbeing, and a desire to help them create the life they want.
Self managed super funds (SMSF) are becoming an increasingly popular choice for investors who want to have control over how their super is invested.
What is an SMSF?
An SMSF is a trust where money or assets are held and managed on behalf of up to four members to provide benefits for their retirement. Subject to certain exceptions, all members of an SMSF must be trustees of the SMSF or directors of the SMSF corporate trustee.
Why establish an SMSF?
Three key reasons for establishing your own SMSF are control, flexibility and investment choice. As trustee of your fund, you decide on your fund’s investment strategy and choose in what your fund’s assets are invested. This means you can tailor your fund’s investments to suit members’ specific needs. The range of investments your fund make is expansive, although investments are subject to some limitations and legal restrictions. Like all super funds, an SMSF receives concessional tax treatment. The top tax rate for the investment earnings of your SMSF is 15%. It’s important to note that this tax concession is only available if your fund complies with all the rules and regulations that apply to SMSFs (a ‘complying fund’).
Understanding the rules and obligations of an SMSF
As a trustee, you need to consider your fund’s investment philosophy. Investing successfully takes time, effort and discipline.
How will you spread your money to manage risk?
How long will you give an investment to prove itself?
What’s an acceptable rate of return?
How much risk are you willing to take with members’ retirement savings?
Another important consideration is your fund’s performance – how is it performing relative to other funds after expenses? If it’s not doing better, or at least as well, you may want to consider using a professional to manage your fund. Rules and obligations applying to SMSFs are complex. And even if you employ specialists to help you with investment strategy, compliance and administration (particularly with Australian Taxation Office requirements), you are still legally responsible for making sure your fund complies with all the rules under superannuation law.
To help ensure that the assets of an SMSF will be available to provide retirement income, SMSFs are restricted in the investments they can make.
If you’re thinking of leaving your current public offer fund to start up a SMSF to get better returns or other benefits, you should discuss your options in detail with your financial adviser. It’s important that you know your obligations for running an SMSF from an administrative and compliance perspective. The rules associated with the super regime are complex and subject to change and the opportunities and effects will differ based on your personal circumstances. Nevertheless the benefits to you and your family may be substantial.