A self-managed super fund (SMSF) is one way you can save for retirement however it is not the right choice for everyone. Before you decide whether a SMSF may be right for you we have compiled the following information to help.
What is a SMSF?
A SMSF is a superannuation trust structure that provides benefits to its members upon retirement. There can be between a minimum of one and a maximum of four members of a SMSF. One of the main advantages of a SMSF is that it allows members to tailor their investments to meet their individual needs however there are strict rules that govern how a SMSF can operate as well as harsh penalties for any wrongdoing so it’s important to get the right advice if you are not sure.
How does it work?
A SMSF is created solely to provide for its members in retirement and their beneficiaries upon death. It will have its own Tax File Number, Australian Business Number and transactional bank account which allows a SMSF to receive contributions, make investments and pay out lump sum benefits and pensions in retirement.
Because a SMSF is a special trust structure the SMSF will need to be managed by a trustee. The trustee can be individuals or a company and specific advice is recommended to determine the correct trustee for your circumstances. The trustee of a SMSF is responsible for all investment decisions as well as complying with the superannuation regulations and tax laws. There are strict rules governing the operation of a SMSF and breaking these rules could result in the trustee being liable for fines and penalties so it is important to seek professional advice to guide you through the set-up and ongoing administration.
What are the benefits?
SMSFs are becoming increasingly popular with Australians with nearly 600,000 in operation today managing close to $700 billion in assets. Here are some of the benefits that are making SMSFs so popular:
- Have complete control over your retirement portfolio
- Have increased investment choice and flexibility
- Potentially reduce administration fees
- Purchase an investment property leveraging your super fund
- Manage or eliminate Capital Gains Tax
- Pool your superannuation assets with a partner or family
- Control who benefits from your estate
How to get started?
If having greater control of your superannuation is something you are interested in knowing more about then we recommend meeting with a licenced professional to help determine if a SMSF is the right option for you. At Taggart & Partners we help clients make the right decisions for your specific circumstances and if appropriate assist with the SMSF set up process and ongoing administration and management of your SMSF.
General Advice Warning:
This information has been prepared without taking into account your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your specific objectives, financial situation and needs.