Self Managed Superannuation Funds Frequently Asked Questions
Key questions and answers.
What is a Managed Fund ?
A manged fund is a unit trust, which pools the money of different investors. This gives the individual investor the oppurtunit to invest in a wider range of assets, not normally accessible to retail individuals. With this pool of money, the Fund Manager will go and invest in property, shares, fixed interest and cash on the investors behalf, according to the type of portfolio they choose. Managed funds are also used by the retirement savings industry for superannuation and pension investments.
What is a SMSF ?
A SMSF is a Self Managed Superannuation Fund for 4 or less members who are all related. A supperannuation fund is a trust, in the same way as a family discretionary trust, or a unit trust. It simply has a limited and special purpose, and restrictions on methods of accounting for the interests in and payments from that trust. You can run it yourself. You and your Adviser get to decide where and when to invest your funds. You get to take an active role in setting and implementing the investment strategy for the fund.
Who can have a SMSF ?
Almost anyone :
- Anyone who is under 70 years of age, employed for more than 10 hours a week and earning income from that employment
- Anyone who already has money in another superannuation fund or any other form of rollover investment.
- A non working spouse ( under the age of 65 years old )
You could be :
- An employee
- Self Employed
- A Director of a Private company
- About to receive a retirement or redundancy package
- Already retired with money in a rollover fund : or
- Retired and already receiving a pension from a private superannuation plan.
You can't be :
- Currently insolvent; or
- Convicted of a dishonest act.
What are your retirement objectives ? How much will you have at retirement ? How close are you to retiring ?
A self - managed super fund may provide you with flexibility of benefits when you retire, such as combinations of lump sum and stream payments. It might also allow you to more efficiently optimise your taxation position on and during retirement.
Is it cost effective to run your own super fund ?
It generally costs about 4% of a person's benefit each year to be a member of a master super fund. This needs to be compared with the cost of having an accountant administer yor self - managed fund and complete your annual return for the fund. The funds complexity and its investments will be the main determinants of how much this will cost.
Is a Self Managed Superannuation Fund the right choice for you ?
Yes, if you prefer to maintain control over your investments rather than leave it in the hands of the institutions. The First Choice Superannuation Solutiions helps put you in charge with professiol advice and procedures supporting you throughout the process.
The First Choice Superannuation Solution provides you with :
- Control, Flexability and Choice -
You get to decide where and when you invest the assets of your fund ( within reason and subject to the relevantlegislation and your trust deed ). You will also get timely and accurate information on the investments your fund holds. As well, you will have the flexibility to structure the fund to suit your personal circumstances, e.g. paying a pension.
- Tax Effective Savings
Assets you might otherwise hold in your name ( but not neccessarily assets you currently hold ) can be held tax effectively as income and capital gains from a complying superannuation fund. Generally this income and capital gain is taxed at a maximum rate of 15% which compares favourably with the alternative of being taxed at the top margin rate plus the Medicare Levy ( 48.5 % ).
- Ongoing And Portable
Whether you're employed, self employed or both, a self managed superannuation fund is fully poratable and can move from job to job with you. The First Choice Superannuation Solution operates not only during your working life but in retirement and in the event of your death will continue to operate for your spouse and children.
- Access To Alternative Investments
There are a tremendous array of different investment vehicles available fo SMSF that are not used by institutional funds. These may allow some "quasi gearing" in the fund to accelerate growth and greater variety of different investments. If you own a business then the SMSF may own the premises from which it operates.
- Estate Planning
SMSF allow greater fleibility for the distribution of death benefits as this is usually at the discretion of the trustee.
What are the perceived disadvantages and the First Choice Solutions ?
There are three main disadvantages comparing SMSF's to mainstream alternatives and it is in these areas that the First Choice Superannuation Solution overcomes any problems.
Compliance and Reporting
Like most other trusts, the super fund needs to have annual financial statements prepared. Super Funds have additional reporting requirements under Superannuation legislation. At First Choice Superannuation, our role is to prepare and required reports to ensure this is not a disadvantage to you. This is an essential component of our offering to you.
Investment Advice
One of the major perceived disadvantages of SMSF's is the need for you, the investor to make informed investment decisions. Our solution means decisions on the investment mix of the SMSF are made by you, in consultation with your First Choice financial adviser, so that it generates an appropriate rate of return for it's members. We believe that most people can enhance their current and future position by adopting a goal based financial plan. Goal based financial planning is a program based on lifestyle and what can be acheived within a lifestyle framework.
Strategic and Taxation Advice
When taking advantage of the tax planning flexibilty of a Self Managed Superannuation Fund, care must be taken to ensure that the fund does not step outside the limits imposed on a SMSF. If a SMSF loses its status the fund may lose its tax concessions. Our professional advisers will help maintain your fund. Your adviser can help keep you informed with the latest investment opportunities and in conjunction with our accounting expertise offer advice on structuring proposed investments and tax planning issues.
