Self-managed super funds (SMSFs) are a way of saving for your retirement.
The difference between an SMSF and other types of funds is that the members of an SMSF are usually also the trustees. This means the members of the SMSF run it for their benefit and are responsible for complying with the super and tax laws.
When you manage your own super, you put the money you would normally put in a retail or industry super fund into your own SMSF. You choose the investments and the insurance.
Your SMSF can have no more than six members. Most SMSFs have two or more. As a member, you are a trustee of the fund — or you can get a corporate trustee. In either case, you are responsible for the fund.
While having control over your own super can be appealing, it’s a lot of work and comes with risk.
Investment Choice-One of the key advantages of a self-managed super fund is its ability to provide investors with a wider variety of investment choices, which can be compared to the retail super market.
One of the main reasons why people who own self-made funds are recommended to own their own business property is to provide them with a steady income and a secure tenancy.
Flexibility & control-As the members of the fund are also the trustees there is the flexibility to tailor the rules of the SMSF to suit their specific needs and circumstances. This is not available with other superannuation funds.
Managing your own super investments directly allows you to make quick adjustments regarding your portfolio following market changes or to take up sudden investment opportunities.
Effective Tax Management-SMSFs have the same tax rates as other superannuation funds, however through a SMSF you can more easily put in place tax strategies that best benefit you and your situation.
Accountability-Being both the trustee and member means you will be more aware of how your super monies are invested and the performance of those investments. This would not be the case with Industry or Retail Super Funds where, due to their size, investment performance is aggregated and not released until many months down the track.
A good SMSF administrator will utilize software that allows you to keep track of the value of your super regularly and give you the ability to obtain up-to-date information whenever you need so that you can track the outcome of your decisions and make the management of your fund easier.
All members of an SMSF are responsible for the fund’s decisions and for complying with the law.
These responsibilities come with risks:
Managing an SMSF is a lot of work. Even if you get professional help, it’s time-consuming.
You need enough time to set up the fund, and time to manage ongoing activities, such as:
SMSF trustees spend on average eight hours a month to manage an SMSF. That’s more than 100 hours a year.
The set-up and running costs can be high. Ongoing costs include:
In 2019, the average operating cost of running an SMSF was $6,450. The median cost was $4,069. (Source: Self-managed super funds: a statistical overview 2018–19, Australian Taxation Office, Table 25: Expenses. This includes deductible and non-deductible expenses reported at the following SMSF annual return labels: approved auditor fee, management and administration expenses, other amounts and SMSF supervisory levy. It does not include costs such investment expenses and insurance premiums.)
You need the financial and legal knowledge and skills to:
Historically SMSFs have not performed as well as retail or industry super funds, also known as ‘APRA-regulated funds’ (APRA is the Australian Prudential Regulation Authority).
APRA-regulated funds use highly skilled professionals to manage their investments. You need to be confident that the investments you choose will perform better.
The table below compares the average returns for SMSFs with APRA-regulated super funds over a five-year period. On average, APRA-regulated super funds achieved higher returns than SMSFs.
The returns you can expect from your SMSF are determined by your balance. If your balance is more than $500,000 it’s possible you may get returns that are competitive with APRA-regulated funds.
Website: – https://www.koalainvest.com.au/