Self Managed Super Funds: It’s all about control

Author name:: By Greg Thornton
Job title:
Date posted:: 05 April 2022, 8:00 AM

According to the ATO there are 593,000 SMSFs holding $733 billion in total assets, with more than 1.1 million SMSF members, as at 30 June 2020. The ATO also reported that the estimated return on assets for the 2018-19 financial year as 6.8%. p.a..

So, what is the appeal of a SMSF and why would someone consider a SMSF? For most people who set up a SMSF the primary motivation for having their own SMSF is the desire for control. The control of investment decisions, tax planning, retirement strategies and estate planning.

Experienced investors and business owners are more likely to want to manage their own superannuation. A SMSF gives members greater flexibility on when they acquire and sell their investments. Business owners, subject to certain rules, can also have their business premises or property owned by their self-managed superannuation fund.

SMSF benefits also include the flexibility of borrowing (subject to strict rules) within your fund for investment purposes.

How much do you need?

While there is no minimum amount to establish a SMSF, it is generally accepted that you require a minimum of $250,000. (this is the total amount invested across all members). The main consideration for this is cost.

To remain competitive and cost efficient it is generally accepted that the greater amount of funds within the SMSF, the lower the cost. Ultimately the cost of the fund will depend on what the fund invests in and how much work is required to administer the fund.

The SMSF Process

Once the decision has been made to proceed with an SMSF the actual establishment does not have to be onerous. Professionals such as financial advisers, accountants and solicitors who specialise in this field are available to assist trustees with the necessary processes.

The steps for setting up your own SMSF involve:

Obtaining a Trust Deed
Appointing the Trustees
Trustees must each sign a Trustee Declaration
Electing to be regulated by the ATO
Identifying the Members
Applying for a Tax File Number for the SMSF, an ABN (if applicable) and/or GST registration (if applicable).
Preparing an Investment Strategy
Opening a Bank Account
Arranging appropriate wealth protection cover for all members.
Transferring existing super accounts

The Right Investment Strategy for your SMSF

Trustees are required to prepare and implement an investment strategy for the SMSF. This investment strategy must reflect the purpose and circumstances of the fund and consider:

investing in such a way as to maximise member returns having regard to the risk associated with holding the investment.
appropriate diversification and the benefits of investing across a number of asset classes (e.g., shares, property, fixed interest, etc) in a long-term investment strategy; and
the ability of the fund to pay benefits as members reach retirement and other costs incurred by the super fund

Members can tailor their own investment strategies and select specific investments such as:

Listed Securities
Managed Investments
Cash, Securities and Term Deposits
Both Direct and Listed Property
Business Real Property
International Equities
Life Insurance Policies
Agribusiness
Instalment Warrants

Ultimately whether a SMSF is suitable for you comes down to more than one factor. You may be planning to make large regular contributions to boost your super, do you want more control over your investments, do you want to invest in assets that your current fund doesn’t offer?

More information

Morgans' advisers can provide you with specific advice on whether a self-managed superannuation fund is the right choice for you, and can assist in setting up, maintaining and administering the fund. If you would like to make a time to catch up for an obligation free discussion, please contact me at [email protected] or via the Orange branch page.

These are examples of some of the strategies that you can consider. As always this information is general advice only and is made without consideration of an individual’s relevant personal circumstances.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited (Morgans) AFSL 235410 ABN 49 010 669 726 as general advice only and is made without consideration of an individual's relevant personal circumstances. Morgans, its related bodies corporate, directors and officers, employees, authorised representatives and agents ("Morgans") do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.