A question often asked is are Self-Managed Superannuation Funds (SMSF’s) suitable for me?
The answer to that question should revolve around whether you want a set and forget superfund plan or whether you want to have greater involvement with your investments and be more strategic in making plans for your retirement.
Typically, however the answer generally provided by our financial services sector is along the lines of whether you have the technical capability to manage a fund and whether you understand the responsibilities of being a Trustee.
Unfortunately, when the latter issue is debated it seems most people will fall well short of what is the required satisfactory level of knowledge or competence to run an SMSF. This approach therefore denies individuals to a raft of strategic investment and retirement planning opportunities generally available to SMSF investors.
So what do you need to know and why is it so hard?
The SIS legislation together with the associated regulations are long and complex and I don’t expect that there are many people, let alone advisers, who have a detailed working knowledge of all the rules. With this approach we would see very few SMSF’s established and used for investment purposes.
Is there a common sense approach and is it really that hard to be a Trustee of a SMSF?
I believe there can be a common sense approach where you also partner with an adviser who has strong technical knowledge to assist you along the way.
Essentially, if people are able to view a SMSF the same way they view their retail superfund they are unlikely to get into too much trouble. Superannuation in its most simple form is a collection of investments being held for your retirement.
Here is a checklist of some of those tricky questions a Trustee of a SMSF needs to be able to answer:-
- Can you use the fund’s monies invested for personal use?
- Can the fund lend monies invested to members or their relatives?
- Can the fund buy assets from members (except for business real property and listed securities)?
- Can the fund enter into investments not maintained on arm’s length terms?
- Can you as trustee act in the best interest of your investments in the fund ahead of other members?
- Can you mix your personal assets with those of the fund?
- Can you hold collectible investments such as artworks at your home?
- Can you contribute as much as you want into the fund each year?
If you answered yes to any of these then perhaps a SMSF is not for you.
But of course SMSF’s are more complex than those simple issues listed above. In addition there are numerous difficult administration rules that you need to comply with that deal with issues such as investment strategies, preparation of accounts, retention of records and provision of information to members. However, this is where a good adviser comes in to assist you comply with the ongoing administration of the fund.
Therefore you should not immediately be put off considering a SMSF and the benefits that they offer. Consider their strategic benefits they provide against that of a retail fund and if a SMSF suits your requirements then engage a good adviser to help you with meeting your obligations.
And if you want to get a better understanding of those requirements then take a look at the Trustee Declaration issued by the ATO athttps://www.ato.gov.au/Forms/Trustee-declaration/
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