Have you ever thought about setting up a Self-Managed Super Fund (SMSF) to provide a way for saving for your retirement? Not sure whether it is the right thing to do? There is no right answer, as everyone’s individual situation is different.
Here are some key areas you need to consider before making any decision:
- Does a SMSF suit me and is it appropriate?
Don’t ask yourself ‘why’ you don’t have a SMSF, ask yourself, ‘why do I need a SMSF’. This may be to provide you flexibility to trade shares on a regular basis, invest in direct property or simply give you the feeling of greater control. Many couples believe that a SMSF is a great way to invest in artwork, collectibles and antiques. You will need to exercise great caution if this is your motivation as the legislation around these items is very strict.
- Am I prepared to invest the time?
Really think about what you want to do during your ‘free’ time in retirement. Most people have spent their lives working and accumulating savings so they can enjoy their retirement. Managing a SMSF is time consuming and between keeping accurate records, liaising with your accountant and deciding on appropriate investments – it can really drain your ‘free’ time. Ask yourself, is this you?
- What is my level of awareness and skills as a trustee?
Establishing a SMSF means that you are the trustee of the fund (or a director of the company that is a corporate trustee), and therefore you need to be equipped to take on the responsibilities of being a super fund trustee. Trustees are legally responsible for all decisions made in a SMSF, from running the fund to organising an annual tax return and audit. You are also responsible for creating an investment strategy and sticking to it. You should by nature have an active interest in investment markets and or be willing to learn. Additionally you will need to have a good knowledge of superannuation and be the type of person that likes to be involved in the decision making process. The penalties for trustees for non-compliance are brutal. Small business owners historically do well in this place, as their personal nature means that they are already in charge of their own business and therefore willing to take on responsibility.
- Who continues the fund if the spouse/partner administering the fund dies?
A common issue we see is that a SMSF is established with spouses/partners as the two trustees and the beneficiaries of the fund. In most cases, the SMSF was established with one member having an understanding of the responsibilities of a trustee. Should this spouse/partner pre-decease the other, now not only are they left with the grief of losing a loved one, but also now have the additional stress of having to maintain a SMSF or having to close or unwind the fund. There is no hard and fast rule when making this decision, as every individual’s situation is different. It is important to seek professional advice to ensure that you will receive significant value from a SMSF.
Talk to us today about whether a SMSF is right for you.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.