Deciding to manage your own superannuation fund is a sizable responsibility however, if done with the right support and advice, isn’t too big of a commitment and certainly worth the effort.
What is a self-managed superannuation fund (SMSF)?
A SMSF is a private superannuation fund regulated by the Australian Taxation Office (ATO) that you manage yourself.
How do self-managed superannuation funds work?
SMSFs operate under similar rules and restrictions as ordinary retail super funds. They do however offer more flexibility around what investments you may hold. For example, you may purchase a number of direct listed shares, your own business premises or an investment property.
A self-managed superannuation fund (paperwork and formalities aside), is just a separate bank account that your superannuation proceeds are held in and then invested from. The actual SMSF is just another structure to invest within (in comparison to a family trust or company). There are however, more levels of rules and restrictions, due to the nature of the funds (being there to provide for your retirement).
When you run your own SMSF you must:
- Carry out the role of trustee or director, which imposes legal obligations.
- Set and follow an investment strategy that is appropriate for your risk tolerance.
- Budget for ongoing expenses, such as professional accounting, tax, audit etc.
- Keep comprehensive records and arrange an annual audit.
- Review the need for insurance, including income protection and total and permanent disability cover for super fund members.
What can you invest your SMSF in?
ASX and international shares can be purchased and held within your SMSF. This may differ from your retail superannuation fund, which may impose restrictions on the direct choice of shareholdings.
Property can be a great way to invest in your superannuation, and many business owners we work with now own their business premises as a result. In addition, you are able to purchase investment properties via your SMSF.
SMSFs can hold collectibles such as artwork, jewellery, antiques, coins, stamps, vintage cars and wine. However, there are strict rules around these assets.
Your SMSF can even invest in cryptocurrencies such as Bitcoin, Ethereum, Litecoin and Ripple. However, due to the high risk of these investments, we see very little investment of retirement funds invested in these.
How can Sharp Accounting help?
For the past 15-years, Sharp Accounting has helped individuals and business owners alike set up very successful self-managed super funds. If you’d like to have a chat with Glenn or Ewen, please leave your details below.