A Guide to Self-Managed Super Funds

Superannuation has now become a necessity of life. Planning for your retirement gives you and your family a sense of financial security. Many jobs provide compulsory super but a lot of time the conditions do not meet the expectations of the employees. This is the reason many people opt for Self-Managed Super Fund or SMSF that gives them the freedom of customizing their superannuation as per their will.

If you are new to the term SMSF, this guide will give you a detailed insight by taking you through each aspect of these super funds. You can know more about superannuation in Australia here.

Defining SMSF

As the name suggests, a self-managed super fund is a fund that you manage yourself. Unlike the other super funds that are usually managed by the employers, the SMSF is managed by the beneficiary themselves. These funds are set up to provide retirement benefits to the beneficiary. There can be a minimum of two and a maximum of four members in one fund including your friends and family. So, each member is a trustee in the fund. It takes around 1 week to set up a fund. 

Before investing in an SMSF, you must determine if these funds are suitable for you. You should ask yourself if you will be able to take out enough time to administer the fund and if you will have enough funds to keep the fund active in the future. 

You should also select your trustees with caution since they will be your co-investors in the funds. It is also possible for your employer to contribute to the SMSF and can be taken as a choice while selecting superannuation.

The requirements of SMSFs include:

• You should have a trust deed that meets the requirement of the Superannuation Industry Act 1993 (SIS Act).
• The employee can not be a member unless related.
• All of the members should be the trustees. In the case where a company is a trustee, the members should be at the director’s position in the company.
• There is no provision of receiving remuneration by trustees.
• Each SMSF will have its own Australian Business Number and Tax File Number.
• To become a member, the person should be over the age of 18 years and should not be under legal disability. 

If you have existing superannuation accounts from your previous jobs, you can get a roll-over form and transfer all of the credits to your new self-managed super fund account. This link will help you in setting up a self-managed super fund: https://www.wikihow.com/Set-Up-a-Self-Managed-Super-Fund  

Advantages of SMSF

There are some big advantages of a self-managed super fund for all kinds of users. Here are some mentioned. 

• You Get All The Control

The first and the biggest advantage of having an SMSF is that you get full control of your investment decisions. This means that you will be responsible for making all investments and decisions. You can also customize the fund as per your need and there is an option to change the investment strategy at any time if there is a need or change in economic circumstances. You are also offered flexibility with estate planning. The members can define the specifics of how death benefits will be paid.

• Many Investment Options

With the ability to make decisions yourself, you can invest in many kinds of funds such as property, shares, bonds, and any other asset that is suitable for your strategy of investment and fulfills your end goal of having a safe retirement option in the future. 

• Tax Compensation

Investing in SMSF means that you will have to pay lower taxes. The Australian government provides tax compensation for SMSF and hence it is a good way to maximize income. 

• Asset Protection

Finally, the assets you have can be protected through your self-managed super fund. This means that in case of bankruptcy, the protected assets will not be included in the legal claims. 

The Disadvantages

Setting up a self-managed fund can be appealing but it also comes with some disadvantages or setbacks. They are as follows:

• The trustee is fully responsible and liable for the fund decisions. This means that whatever decision you take, you take full responsibility in case of any loss.
• The investments might not give expected returns at any time.
• You will have to set aside time to manage the funds in all conditions even if you are extremely busy. You will also need financial and legal knowledge which again takes time to understand. 
• In the case of funds that have a trustee, problems can arise in case there is a fallout between the members.
• In case of losing a job or income, you will still have to manage the SMSF which will require you to set aside some money for such situations.

Even though all of these problems are manageable, you will have to keep all of them in mind before you plan on opening your self-managed super fund.

Do You Need A Financial Planner For Your SMSF?

If you are someone who does not have a lot of knowledge in the finance department and does not have enough time to learn about the technicalities, hiring a financial planner is a good option for you. A lot of firms such as SMSF accountants – Arrow Financial provide you with professionals that can advise you on the best course of action for your super funds. A financial planner will take care of all your financial needs including your super funds and plan a good retirement for you.

Conclusion

Self-Managed Super Funds gives you full control of your savings for retirement. You can customize the funds as per your requirement and even include members of your family. Not only does it offer a great choice of investment, but it also has a lower cost in the longer run. 

With the right management, you are also able to save taxes in the present and have a secured income after retirement. So, research the best SMSF for you and invest in it by yourself or with the help of a financial planner.