SUPER & SMSF
A key tax effective retirement savings vehicle that everybody has
but not everybody uses the way they should.
super is simply another investment.
It just has an advantaged tax structure to encourage you to save for your retirement and look after your own future. What is the point of working the hours you do to get some funds behind you if you are going to just pay maximum tax on them? Getting as much of your funds invested in the most tax advantaged structure we have available to us, is always a good idea!
Any investment has two sides to its returns. The capital side and the income side. Once we put together the strategy to get as much money into the super environment we need to invest it in a way that is going to set up the income you need to fund your tomorrow.
The long term return of investments is easy to understand. If we get your assets earning more dollars next year and future years than they did this year when and if time comes to sell someone will be happy to pay you more than what you paid for it. Congratulations your capital value has gone up! Yes, capital values will fall and rise in the short term but if the income is going up then your capital value will follow.
As super is just the vehicle that can hold an investment for you please click here for our investment philosophy.
Self Managed Super Funds are Awesome…
But are they for you?
Well there is a lot of noise about Self Managed Superannuation Funds (let’s call them SMSF) and the numbers of funds being started continues to grow each year. But there is a lot to them and I see a lot of clients that started a SMSF because their accountant said it was a good idea and they end up with hundreds of thousands of dollars sitting in cash deposits, often not even term deposits, earning minimal interest and not even covering the Accountant’s fees to manage the accounts and Auditing of the fund. So if you have one of these, please call me ASAP as your fund needs some attention and you may not be meeting your legislative requirements if the fund is not invested in an appropriate manner that lines up with your Trust Deed.
We need to have a very good reason to start a SMSF. Firstly, the general rule and from ASIC research is that you need more then $200,000, this is the point where it can be cheaper to run a SMSF then use a retail fund. There are many variables in this and I believe that figure is more like $350,000 by the time you take into account the large administrative burden placed on the members of the Fund. There is so much to consider before you start a SMSF, cost is just the starting point.
If you don’t have a SMSF but would like one there are many advantages. The best one is that if you own your business, you can purchase the premises you run your business out of and pay the rent to your SMSF and not another Landlord. This gives your business security of location as well as further building your retirement savings. Win/Win. With more than $350,000 we can structure your Super in a very economical way to purchase assets in all investment classes and you have full control over your funds.
Always keep in mind that although this is your money you do not have access to it for personal use. For this reason, I am not a big fan of residential property inside a SMSF. It is very hard to prove that you or a family member are not using the property and I have seen clients run into issues with the ATO coming to us for advice on how to restructure their assets in their SMSF after the ATO audited their fund to find that it was the members aging parents renting the home owned by the fund. This does not meet the rules of a SMSF and the ATO required that the parents’ move out (not a great option in their late 80s!) or the asset be sold out of the fund. We were able to put forward a strategy that met the SMSF legislation with minimal impact on the clients or the parents, but its always easier to get the structure correct from the start.
The biggest mistake I see clients make before coming to Elevation Financials is they get very excited about starting their own SMSF, move all of their funds out of their previous super fund and all of a sudden realise that in the process they have Cancelled their insurance they had in that old Super fund. This can be nasty if their medical history causes a new policy application to attract a loading greatly increasing the premium (possibly adding 250% to the cost of their insurance), OR, the application can have an exclusion for certain medical events or be declined outright based on medical history. The simplest solution…. Talk to us first, we can work through how much insurance you need and make sure any required policies are in place before old ones are cancelled. ALWAYS have a new Policy document in your hand before doing a rollover out of your old fund.
So if you have or are considering a SMSF please reach out to us as there are four possible outcomes;
It could be the best financial decision you have ever made and Elevation Financials can help you establish your very own SMSF.
It might be a ‘Not Yet’ situation where your circumstances don’t quite suit a SMSF and we can come back to it in time to come.
Maybe you don’t have the ability, interest or need to ever have a SMSF, so we find you a different solution for your retirement savings.
You have the interest and the need for a SMSF but need advice for the ability part on the structure of your SMSF and the assets that you purchase along the way.
Regardless of which of the above scenarios suit your situation Elevation Financials can help you decide if a SMSF is right for you. We can also make sure the SMSF you already have is firstly compliant, making certain that you will not be hit by any penalties from the ATO, and secondly, invested in line with your goals and objectives to produce the income that you will need to support your lifestyle into the future.
In short – yes, I believe that SMSF are awesome but let’s work out together if it is the way to go for you.