The number of Australians choosing to manage their own super through a self-managed
super fund (SMSF) is bigger than you might think. There are currently over 395,000
SMSFs with a total of over 500,000 members. An estimated 2,000 new funds are also
being established each month. *
How do SMSFs work?
Broadly a SMSF is a fund with less than five members. Each member is also a trustee
of the fund (alternatively the fund can have a corporate trustee structure). Some
of the other key features of a SMSF are:
- A SMSF must be maintained for the 'sole purpose' of providing benefits to members
upon their retirement.
- Trustees are required to prepare and implement an investment strategy for their
fund. This controls the way contributions are invested.
- Wide flexibility in investment choice for example, direct property, managed investments
and direct shares can all be included in the portfolio.
- Approved auditors must be appointed and tax agents, accountants and financial advisers
may also be involved in the running of a SMSF.
- Ultimate legal responsibility rests with the individual trustees (ie. the members
of the fund) even if assistance is outsourced to the above professionals.
Why consider a SMSF?
Managing your own super could give you greater control and flexibility. The discretion
to pick and choose your own strategy and investments, as well as the tax benefits
of superannuation make SMSF a unique investment tool.
What are the pros and cons?
There are number of advantages and disadvantages associated with SMSFs.
Advantages:
- Investment choice - the portfolio can generally include a wide range of investments.
- Control - trustees have complete control over the fund and its investments (within
the legislative framework).
- Holistic approach - SMSFs may provide you with a range of options in terms of estate
planning and benefits payments.
Disadvantages:
- Trustee responsibility - each trustee is fully responsible for the decisions and
operation of the fund. This includes the overall legislative compliance.
- Extra costs - a SMSF has additional costs such as the auditing of accounts, tax
return administration and supervisory levies.
- Costs can be high - for funds with $200,000 or less, the costs can be relatively
high as a percentage of the fund's assets.
Speak to your financial advisor
If you want to know more about Self Managed Super, talk to your 1SPORT Financial
Adviser. They will give you more detailed information and point you in the right
direction for your circumstances. You can also give us a call on 1300 172 292
*Source: APRA Superannuation trends September Quarter 2005.
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