Self-managed super funds have become a popular way for Australians to build their retirement savings. In fact they’re now the fastest growing part of the superannuation market, with more than one million of us being members of an SMSF according the A statistical overview 2012-13 from Australian Taxation Office. Thousands of SMSF Setups are happening every year and, with more than half a billion now invested, they represent about one-third of Australia’s total Superannuation savings.
According to the SMSF Adviser / Financial Advisor of CLY Financial Planning, the popularity of SMSFs can largely be attributed to the fact that more and more people are deciding they want to have greater control over their investments. People want the flexibility to make their own decisions about what to invest in, and the ability to change direction quickly, if needed.
Keeping it in the family SMSF
There is no legal time limit on how long an SMSF can last. As long as the Trust Deed is kept up to date, it can essentially keep going forever. A self-managed super fund allows up to four people to pool their super and take responsibility for managing it as trustees, with the sole purpose of providing benefits to its members on their retirement. Under the Super Industry Supervision (SIS) Act, an SMSF can have a company as the trustee of the fund. This is also known as a corporate trustee. When it comes to securing your family’s estate, and succession planning considerations, appointing a corporate trustee can have some advantages. While there is a greater up-front cost with establishing a corporate trustee, there can be long-term benefits which outweigh those costs, especially if you are focussed on future generations.
SMSF and Property
Property, along with Australian shares and cash and term deposits, make up the bulk of Australian SMSF assets. The Self-Managed Super Fund can have investments in two kinds of real property. These are commercial property, like a factory, a warehouse or a business leased premises, and residential property such as investment units and houses. As with all things superannuation, there are rules around investing in property in SMSF fund.
Limited Recourse Borrowing Arrangement (LRBA)
It’s not that surprising that those who like the direct control of self-managed super are often also very interested in the benefits of gearing into property investment. Super rules allow self-managed funds to borrow and this has opened up the opportunity to use gearing to buy direct property assets as part of their SMSF portfolio. However, it must be done under very strict conditions called a ‘Limited Recourse Borrowing Arrangement (LRBA)’.
SMSF Advice from CLY Financial Planning
There are many benefits that the SMSF can bring all along the way. In the meaning time, the SMSF guidelines are strict and the penalties for non-compliance are severe. The suitability of the SMSF strategy will depend on individual circumstances, so our SMSF advice recommends a cautious approach and professional assistance to help you understand the risks before going ahead with the SMSF setup.
Our SMSF Adviser / Financial Advisor are equipped with the knowledge and expertise to help you get the most out of SMSF. Our SMSF advice includes but not limited to SMSF setup, SMSF administration, develop investment strategy, SMSF Investment Advice and SMSF Insurance Planning. Please Contact CLY Financial Planning if you are interest or want to know more about Self-Managed Super Fund (SMSF).