Have you considered setting up your own Self Managed Super Fund?
You can set up your own private super fund and manage it yourself, but only under strict rules regulated by the Australian Taxation Office (ATO).
An SMSF can have between one to four members. Each member is a trustee (or director if there is a corporate trustee). Running your own fund is complex.
When you run your own SMSF you must:
- Carry out the role of trustee or director, which imposes important legal duties on you
- Use the money only to provide retirement benefits
- Set and follow an investment strategy that ensures the fund is likely to meet your retirement needs
- Keep comprehensive records and arrange an annual audit by an approved SMSF auditor
If you're running an SMSF you will typically need:
- A large amount of money in the fund to make set up and yearly running costs worthwhile
- To budget for ongoing expenses such as professional accounting, tax, audit, legal and financial advice
- Plenty of time to manage the fund
- Financial experience and skills so you are more likely to make sound investment decisions
- Separate life insurance including income protection and total and permanent disability cover
You can pay an adviser a fee to do the administration or help with the investment decisions for your SMSF. However, be sure you understand what your adviser is doing because you cannot pass on the responsibility of being a trustee or director.
Questions to ask
Before setting up an SMSF, ask yourself these questions:
Have you considered other do-it-yourself (DIY) super options?
Many professionally managed super funds have DIY investment options which let you choose which assets you'd like your super invested in such as shares, EFT’s (exchange traded funds ) and term deposits. This gives you some control over your specific investments without the legal and administrative requirements of running an SMSF.
Have you considered other super funds or investment options?
If you're thinking about setting up an SMSF because you're not happy with your current fund, consider changing to another fund or investment option first.
Will your self-managed fund outperform your current fund?
Super funds use professional managers to invest your super money. Can you do better than the professionals?
Have you considered the costs?
There are running costs that go with having an SMSF. These include the cost of investing, accounting and auditing for your SMSF, which may be much higher than what you are currently paying. These costs will cut into your retirement savings.
Will you lose valued benefits?
Super funds usually offer discounted life and disability insurance. If you set up an SMSF you will have to purchase your insurance separately. Make sure you look into your insurance options before closing your current super account as age and health issues can limit your ability to buy a new policy and increase your premiums.
Do you know enough?
Do you know all your legal responsibilities? Are you on top of the investment market? Can you manage a diversified portfolio of investments? Do you know the tax implications?
What if your relationship with others in the fund changes?
If there is more than one member in your SMSF, have you written a plan outlining what will happen in the event of ill health, death, relationship breakdown, or waning interest?
In summary it’s a big step to set up your own Self Managed Super fund but the rewards can well be worth it. It can become your most powerful long-term investment vehicle for your entire family. But always get advice.
If you would like further information contact Gordon Hatch on gordon@taurusfinancial.com.au or call 02-9411-4161
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