A self-managed superannuation fund can give you greater control of your investments and personal wealth, but many people are unsure about what an SMSF actually involves.
This guide will help you understand what an SMSF is, how it works, and how you can reap the benefits.
Get expert advice from the team at Liston Newton Advisory and find out if an SMSF is right for you.
What is an SMSF?
A self-managed super fund is a type of superannuation which gives you control over how you invest your retirement savings. This means you are responsible for managing the fund and complying with regulations—as opposed to the retail or industry super fund being responsible.
Some features of an SMSF include:
- Greater control over your investment strategy
- The ability to choose when to buy and sell investments
- Being responsible for ensuring compliance
How does an SMSF work?
If you decide to set up and run an SMSF, you will get to choose how to invest your money and grow your personal wealth; but that also means you're responsible for the things that a retail or industry super fund would normally do for you. Here's how some of those things work in practice:
Choosing your investments
You need to have clear financial goals and a documented investment strategy that will help you to achieve them. This can be especially beneficial if you are interested in specific types of investments, such as property.
Here are some things to consider when choosing your investments:
- What stage of your career or business life are you in?
- What level of risk are you comfortable taking?
- What do you want to achieve with your super?
Responsibilities
If you have an SMSF, you are effectively owning and running a super fund just like a retail or industry super fund. This means you are ultimately responsible for ensuring that your fund is run correctly and remains compliant with the Australian Tax Office (ATO).
Some of the things you need to do to stay compliant with the ATO include:
- Lodging annual tax returns
- Being independently audited every three years
- Having a documented investment strategy
Professional advice
Even though it's self-managed, you don't have to do it all on your own. At Liston Newton Advisory, we can work with you to ensure that your SMSF is managed correctly and is effective in helping you achieve your financial goals.
These are some of the things we can assist you with:
- Developing and executing your investment strategy
- Handling tax returns and other paperwork
- Ensuring compliance with the ATO
Do you need an SMSF?
Whether or not an SMSF is right for you will depend on your individual circumstances. Setting up an SMSF may be conducive to reaching your financial goals, but it's not the right option for everyone.
Firstly, an SMSF is not something which you can 'set and forget'. It's best if you take an active interest in running your super. However, you can choose to have as little or as much active involvement as you like. If you're unable to commit to doing this, you may struggle to enjoy the full, expansive benefits of an SMSF.
Secondly, you need to have a certain amount of money in your super already; this is a combined balance of $200,000 (ie for husband and wife). If you have less than this amount, you're unlikely to be able to implement an effective investment strategy and—once again—won't be able to reap the benefits of your SMSF.
Read more about how an SMSF compares to retail and industry super funds.
How to reap the most benefits of an SMSF
To get the most out of your SMSF, the most important thing you need to do is get professional financial advice.
It's imperative that you make sure your SMSF is correctly set up and is structured to be tax effective. You also need to make sure that your investments will be protected in the event of a market downturn, like the Global Financial Crisis. The best way to guarantee the points above are being met is by following expert advice.
You also need to actively monitor your investments to ensure they are performing as expected. By doing so, you'll know whether you're on track to achieving your goals or if you need to change your investment strategy. Your financial adviser can help with this as well.
It's also worth comparing the fees you are currently paying in a retail or industry super fund with the fees you can expect to pay with an SMSF. Industry and retail funds typically charge fees based on a percentage of assets under management, these can be upwards of two per cent. You will typically pay a flat fee for an accountant and adviser to help you run and advise you on your SMSF— combined costs usually start at around $5,000 per year. So, in many cases, an SMSF will cost you less in fees.
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Choose Liston Newton Advisory for SMSF advice
At Liston Newton Advisory, we can help you set up and run your SMSF while providing expert investment advice every step of the way. Our advice not influenced by any financial institutions—our only objective is to help you achieve your financial goals.
