A self managed super fund (SMSF) is a type of superannuation scheme that is set up to provide retirement income for the members of that fund who either manage the fund or with assistance from an external services provider.
An SMSF is a trust where the beneficiaries are also the members. An SMSF must pass the ‘sole purpose’ test, that is, it exists for the sole purpose of providing retirement funding.
An SMSF can have a maximum of four members. In reality, most self managed super funds are set up by a couple eg. Mum & Dads.
- To be able to make their own decisions about where their super is invested.
- To invest in your own chosen property (business premises or residential).
There are many advantages, which can loosely be classified into greater control, improved flexibility and tax planning. These are the main advantages:
- Greater choice of investments – including, for instance, commercial real estate and collectables.
- The ability to borrow for investment purposes unlike retail funds
- Flexibility of tax planning and deferment of tax payments
- You can transfer assets ‘in specie’ – e.g shares, commercial real estate, term deposits
- Pool family assets into one vehicle, pay one fee (note that the entitlements of individual members will be accounted for)
- Flexibility regarding transition to retirement options, which can be very beneficial from a tax perspective
- Access to franking credits, which can be offset against tax payable by your super fund (or you can receive a refund if no tax is payable)
- Protected from creditors if operated correctly
How much super do I need to set up a SMSF?
Some new media stories suggest you need at least $200,000 (or even higher) to make it cost effective to have a SMSF. We disagree. A SMSF is your family wealth creation vehicle. Even if you have as little as $100,000 in super right now, it may make sense to establish an SMSF and then set up life insurance (owned by the SMSF) on SMSF members while they are still fit and healthy. Also, in many situations using a SMSF can give you much better estate planning options.
As an example, if you have $100,000 in super and purchase a property (using a borrowing arrangement) valued at $400,000, then you would have a SMSF with $400,000 in gross assets. Assuming a capital growth rate of 5%, you would generally expect the larger amount of $400,000 growing would provide a better outcome than the smaller amount of $100,000 growing. This is why many people consider a borrowing arrangement for a SMSF.
To grow your wealth, there is little doubt that an SMSF is the most flexible vehicle.
With your own super fund, you can access direct shares and a wide range of investments not available when your money is tied up with everybody else’s.
It allows you an unsurpassed degree of tax planning and tailoring and it can also be very cost-effective.
Retail funds have generally had an atrocious performance over the past decade, lower even than indexed funds. In addition, fees can be high (there seems to be little if any correlation between the performance of your super fund and the salaries commanded by many fund managers). Funds can also be quite restrictive; meaning that even if fund managers think an investment is a bad idea they are bound by guidelines that stipulate what they can invest in.
People who have an SMSF tend to be much more actively involved in investing for their retirement.
Indeed, you are required to have an investment strategy but you can outsource the management of your investment portfolio to Ceebeks Business Solutions For GOOD, leaving you to relax and enjoy the benefits without having to worry about your investments on a daily basis.
To assist you to make an informed decision, contact us TODAY on (03) 5561 2643 and we can arrange a time for you to come in and have a chat about the benefits of an SMSF and whether or not a SMSF is the right thing for you.
Don’t delay. The sooner you get started with the right advice, the sooner you will grow your assets to have a better financial future!
General advice disclaimer
The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, & objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product. Only financial planning advice provided by Ceebeks Financial Solutions is associated with MyPlanner Professional Services.Chris Beks is a director of Ceebeks Financial Solutions and an Authorised Representative of MyPlanner Professional Services Pty Ltd, ABN 51 159 969 830; AFSL 425542 and is authorised to provide personal financial advice.
Business Development Specialist - Ceebeks Business Solutions for GOOD
I love business and the ability to change people’s lives through them!
At Ceebeks Business Solutions for GOOD, we get up every morning to positively impact young families in business by making their businesses REALLY work so that we all make an even bigger impact together. The rewards that bring allow our team ('the fantastic five') to make small but powerful contributions to impact our local community, our country and the lives of those less fortunate around the world.
You see, something quite remarkable happens when we work together, for example, the gift of water is made when we prepare a tax return, the gift of a goat is provided when we help a new business start-up, the gift of shelter is forwarded when we organise a home loan. When we work together, we actually change the world!
I am a business development specialist with nearly 40 years’ experience, a CPA, an authorised representative of Avana Financial Solutions Ltd (Authorised Representative no. 231937) and a credit representative of Outsource Financial Pty Ltd (Authorised Representative no 396061). I have recently co-authored an International Best-Selling Book 'Legacy - The Sustainable Development Goals in Action' and in 2020 published my first book - 'Chasing the Dream! - How to Grow a Business in these Amazing Times', host a daily blog/vlog on our small business Facebook community group page 'Chasing the Dream, and with our Team run a monthly event for small business owners called 'The Chasers Meet-Up', where a guest speaker presents a topic and tips and strategies are openly shared.
In 2015, our business won the Change GPS International Member Firm of the Year and in that same year, I was a founding member of the Global Accounting Movement - Accountants for Good. We were recognised in 2016 by Steve Pipe in his international publication - The World's Most Inspiring Accountants and Featured in "The LinkedIn PlayBook" by world-renowned social media strategist and consultant, Adam Houlahan. In 2017, we were in the Top 25 Most Popular Accounting and Tax Services Award for search4accountants, B1G1 Business for Good Top 100 Giving Businesses in the World and a Semi-Finalist in the 2017 Victorian Regional Achievement and Community Awards. In 2018, we were an Australian Accounting Awards Finalist in "Community Engagement Program of the Year", a Semi-Finalist in the Victorian Regional Achievement and Community Awards 'South West TAFE & Deakin University South West Regional Achiever Award', a Nominee in the Victorian Regional Achievement and Community Awards 'Regional Development Victoria Business Achiever Award', and featured in the Top 25 Most Popular Accounting and Tax Services Award by search4accountants.