Limited returns and high administrative costs are pushing people to explore self managed super funds

13th Jun, 2012

Small returns (as low as 5.1% per year) and high administrative costs (over $1000 annually) have caused people to consider self managed super funds or SMSFs to secure a comfortable future.

With SMSFs rapidly in popularity, we see them hold a large percentage of all super assets; almost 30%. In June 2011, there were almost 500,000 self managed super funds with a total of  $418 billion dollars in assets.

Self managed super funds are maintained for the purpose of providing benefits to members upon their retirement or earlier should they meet a condition of early release or in the event of a member’s death, payment is made to  their nominated beneficiaries. All SMSFs are governed by a trust deed and an investment strategy.  This stipulates the rules that the trustees must follow, defines how trustees are appointed including their powers, how  payments of member benefits should be handled, and types of assets the fund can acquire to name a few.

All trustees of SMSFs must also be members of the SMSF, be over the age of 18 and must not have been convicted for any offences or declared bankruptcy. Trustees can be appointed as individual trustees or as directors of  a corporate trustee, regardless of this trustees are ultimately responsible for managing the member's retirement savings and complying with all super and tax laws, even with the help of finance professionals.

It's no wonder that more and more people are steering towards setting up their own SMSFs especially when you consider some of the many advantages offer and the recent stock market uncertainly.

  • Self managed super fundsprovide you with the opportunity to reduce income tax on investment income and capital gains;
     
  • Self managed super fundsincrease the flexibility of investment choices and the asset selection;
     
  • Self managed super fundsprovide control over your total investment portfolio, with the ability to take account of the risk profile of all your assets, including those held outside superannuation;
     
  • Self managed super fundshave between 1- 4 members in the fund and allow the pooling of resources of others with similar financial objectives (for example, a family unit);
     
  • Self managed super fundsprovide maximum flexibility in relation to the use of pension income streams such as Account Based Pensions inclusive of Transition to Retirement Income Streams;
     
  • Self managed super fundsprovide increased flexibility to use the advantages superannuation offers for those people trying to access Centrelink benefits such as the age pension;
     
  • Self managed super fundsgive you the ability to transfer personally owned shares and other listed securities directly into superannuation;
     
  • Self managed super fundsalso give you the ability to own your business' real property (but not operating assets) in the superannuation fund, assisting funding and cash flow problems for many businesses.
     
  • Self managed super fundshave the opportunity to borrow or gear an investment such as property, via limited recourse borrowing arrangements, provided the asset is allowed under the rules of the SISA Act.

Though it requires of responsibility, self managed super funds are clearly here to stay. To determine the suitability of  an SMSF to your individual financial situation it is highly recommended that seek financial advice from a qualified professional.

GENERAL ADVICE WARNING:The information contained in this document may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

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Disclaimer: The information contained in this website is of a general nature and has been sourced on good faith as such it should not be construed as personal advice. Whilst the writer has adopted care, diligence and competence, the information has not been prepared taking into account any particular investment objectives, financial situation or particular needs. The Wealth Creation Group and WCG Financial Solutions Pty Limited accept no responsibility for any content contained in external links on other company websites or externally sourced information.