Self Managed Superannuation Funds
More and more Australians are choosing to take control of their super within a Self Managed Superannuation Fund. About one-quarter of all superannuation in Australia is held in Self Managed Super Funds and data from the Australian Taxation Office shows that the total amount of assets held in SMSFs at June 2011 is $418 billion.
During the year ended 30 June 2011, 33,106 new SMSFs were established, bringing the total number to 456,472, with each of these funds holding an average of $888,433.
As the name suggests, a Self Managed Superannuation Fund (also known as a DIY Fund) is a fund that you or your adviser sets up and you can manage yourself. Unlike an employer or retail super fund, you are responsible for investing the funds and managing the administration. A Self-Managed Super Fund offers flexibility and investment choice for those who have the time and resources and can also be beneficial for family members who want to manage, control and pool their retirement savings.
How does an SMSF work?
- The fund must have less than five members, but of course may have just one. Each member must also be what is called a Trustee.
- Trustees must take responsibility for control over the assets in the fund. They can invest in a range of assets including shares, property, managed funds or cash. The Trustees of the fund are responsible for investing and managing the fund in compliance with super, tax and trust laws.
- Your MBA adviser is able to assist in the set up and administration of your fund.
What are the benefits of an SMSF?
- As an SMSF member, you get more control over how your funds are invested. If you have a strong interest in investing and have the time to manage it, this can be a great way to grow your retirement savings. SMSFs also offer the opportunity to invest in assets and asset classes that may not be available in other super funds, such as direct shares and properties.
- SMSFs may have lower and fewer fees than a professionally managed superannuation fund, so costs might be minised this way. However, this will depend on how big your fund is and how many members are involved.
- In some cases, SMSFs may offer asset protection. For example, in the case of bankruptcy - such as a small business owner - if the business goes bankrupt, the assets in their self managed fund are usually protected.
What are the drawbacks to managing your own super?
- It's important to remember that any super fund has to comply with a variety of Australian laws and Trustees face penalties if they don't meet these laws.
- Having investment choice can be great for some, but not everyone has the necessary experience and industry knowledge to run their own super fund.
- You need time, money and lots of self-discipline to keep up with administration costs, trustee meetings, investment research and keeping up to date with the super industry.
Of course, this is general advice. Each person's situation will be different depending on what stage in life they are at, so before acting on these general tips, seek advice about whether it's appropriate in light of your own objectives, financial situation and needs.
More information?
Michael Beddoes, FCA
Director
e mbeddoes@mbapartnership.com.au
t 07 5557 8700