What is a SMSF?
Like your retail or industry superannuation funds, a SMSF is a way of saving for your retirement. The main difference of an SMSF and other superannuation funds, is that the members control every aspect of the fund from investment choices to the administration.
A SMSF is becoming the favoured vehicle to hold savings and investments for people as they pass 45 years of age and are planning their retirement in the not too distant future.
Advantages of a SMSF Over Other Funds
Set-up and Maintenance of a SMSF
Advantages of a SMSF Over Other Funds
a) Cheaper to maintain: The standard fund charges an annual management fee of up to 2% of the fund’s assets. Thus for a fund with investments held of $500,000 a fee of $10,000 would be charged annually regardless of the fund’s performance. By comparison, a SMSF usually has maintenance costs of only $1,500 to $3,000 depending on the complexity.
b) Better performance: For SMSF’s with an investment balance of over $500,000 they have on average achieved greater returns than both industry and retail superannuation funds.
c) Personal control of investments: The Trustees of the SMSF which are usually husband and wife take full control of how and where the money is invested. So if you have a conservative profile, the funds assets can be invested in say Bank Term Deposits and a mixture of Australian Blue Chip Shares. This minimises the risk of exposure to overseas markets and fluctuations in the Australian dollar which many managed funds are exposed. However all investments in a SMSF are at the discretion of the Trustees.
d) Ability to invest in real estate: A SMSF is able to invest in either commercial or residential real estate property. It also has the ability to fund the property purchase through the use of limited recourse borrowing arrangement of up to 75% for residential, and 65% for commercial. It is important to note that the property can not be rented to members or any related parties.
e) Purchase of business premises: If you run a small business it maybe a suitable strategy to own your businesses premises through your superannuation fund rather than paying rent to a third party. As mentioned above you can fund 65% of the purchase through a limited recourse borrowing arrangement.
Set-up and Maintenance of a SMSF
Along with these benefits of switching to a SMSF, comes the responsibility for ensuring your fund is properly administered and this is where Sunderland Accounting can assist. We will ensure your fund complies with all legislative requirements, whilst providing you with peace of mind and quality advice. Sunderland Accounting can:
- help you decide if a self-managed fund is right for you
- establish the fund
- administer and organise the audit of the fund
- prepare and lodge tax returns
- provide advice on transition to retirement and pension strategies
Administering SMSF’s is one of our specialties. Click here to contact us for an appointment to discuss how we can help set up a SMSF.