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Today, making provision for retirement is a crucial part of any financial plan. As investment markets have opened up new opportunities, the options available to anyone looking to make such provision are more diverse than ever. However, greater numbers of people are also looking to take control of their own future and looking for alternatives to relying on fund managers. This is a result of more open access to markets today, with investors having a much greater depth of knowledge about investing and its processes than ever before.
The Self-Managed Super Fund is a reaction to that need, offering a superannuation fund that offers all the usual advantages of tax reduction and retirement provision, with the added benefit of self-management. While tightly regulated, Self-Managed Super Funds do have flexibility, as they can accommodate from one to four members. This opens up a range of options for families and business partners that can be extremely beneficial for specific situations.
With each member being a trustee of the fund or a director of the company appointed trustee, a Self-Managed Super Funds do requires a commitment of time and expertise. As a trustee, you are charged with the decision making for all fund investments, as such the performance of the fund rests with the trustees almost exclusively. If it is a one-member trust for yourself, then your super fund is entirely in your hands, and that is not a responsibility you can ignore when inconvenient. As such, starting a Self-Managed Super Fund is a solid investment in time as well as funds, and the viability of maintaining that commitment must be considered before choosing this approach.
When initially setting up the fund, members can choose to be individual trustees or use a company to become the trustee for the fund. The corporate approach includes higher initial costs, and all members of the fund must be directors of the company, however, it often results in saved costs through the life of the fund, and it should be a serious consideration for anyone considering a Self-Managed Super Fund.
Beyond the technicalities of the legal framework for a super fund like this, there are also some restriction son its investments that should be considered. In particular is the legal position that no member or any person or entity related to them, can benefit from assets held by the fund. This can be problematic because it applies to all assets with the exception of commercial property. For example, a residential property purchased as an asset of the fund could not be let to a fund member’s family, even at market rate. This is a common way to take advantage of long-term property investment for retirement, and if it is a possibility, then a Self-Managed Super Fund is not a solution to use.
Despite those restrictions, however, the attraction of a super fund combined with control and investment choice is compelling, and with over 60,000 Australians taking up a Self-Managed Super Fund each year, it is one of the fastest growing options for retirement planning available on the market.
For the full breakdown of Self-Managed Super Funds check out our article: The Self-Managed Super Fund and why you should have one
