25 Nov 2014
If you’re under 55 and thinking about setting up a self-managed super fund (SMSF) you’re not alone. SMSFs are being established by younger Australians wanting greater control over their super. In March 2014, younger people represented 75% of new SMSF members.i
Before deciding if an SMSF is right for you, consider some of these important questions.
How much do I need?
Consider how much you’ll have if your super is combined with other potential fund members. And keep in mind that if your combined balance is less than $200,000 the ATO suggests an SMSF may not be the most cost-effective option - when compared to fees in other funds, SMSFs may cost more.
What age do I need to be?
You must be 18 years or over to be a trustee of an SMSF. People under 18 can be SMSF members, but conditions apply - for example a parent of a younger member may need to act as their trustee. Generally, all members must be trustees of the fund. They have legal obligations and are responsible for the management and decisions of the fund.
If you’re under 55 you or your spouse may be actively contributing to super and ideally have considerable super assets already. If you’ve also gathered investment knowledge and experience along the way, it’ll come in handy if you decide to manage your own fund.
What are the opportunities?
You can pool your superannuation with up to four family members (including yourself). While this provides the opportunity for costs savings - the bigger the fund balance the greater the potential for savings - but you also have full transparency of all the costs and returns for your super. That can help you manage your tax effectively too; another benefit of an SMSF.
An SMSF gives you investment flexibility too. So not only can the fund invest in direct property - residential and commercial - but it can borrow to invest. If you are a business owner your SMSF has the potential to buy premises you can lease back. Special rules apply so make sure you seek advice.
When it comes to accessing your money down the track - and how you’ll hand down your assets when you die - you have several options. It’s another area where you’ll benefit from gaining specific advice.
SMSFs have grown rapidly to become a large share of the superannuation sector, both in terms of the number of entities and funds under management. We are able to assist in the management, administration and compliance of running an SMSF. If you would like to discuss your options, contact your PSK adviser.
i. Those aged under 55 years establishing an SMSF, ATO Statistical Report March 2014.
If you would like to meet with your PSK adviser, call us on (02) 9324 8888 or click here.