Self Managed Super Funds

Topics: Investment, Taxation, Superannuation in Australia Pages: 8 (3082 words) Published: May 17, 2013
Part A
a) Self-managed super funds are small funds and have fewer than 5 members who are trustees have rights to make investment decisions of their funds. Once you set up, you're responsible for managing it basically under section 17A of the Superannuation Industry Act 1993 and making reports to the ATO on its operation. Advantages of SMSF’s

There are many advantages for setting up self-managed superannuation funds. First it can be cost effective against other funds such as retail personal superannuation funds and industry funds. A research was done by Investment and Financial Services Association states that total administrating expense rate of establishing self-managed superannuation funds is 0.98% in 2008 compared with 2% for retail personal super fund and 1.07% for industry funds. Members are able to reduce administrating cost by bargaining with agencies as well. It is attractive for small business owners and self-employed workers due to lower cost for high account balances and it enables to hold the business that they do in self-managed superannuation funds. Almost 39 % of all members are self-employed in it. Because of the growing size it has been cheaper to run in recent years. Secondly, personal control, interest in investment and personal satisfaction can be other advantage for Self-managed superannuation funds in order to make better investment decisions rather than other investment managers and also more options in investment strategies regarding to get high outcomes. The great flexibility takes place in this investment vehicle. For instance, investments can be done in any of the assets which can be Australian shares, trusts, option or bonds. It would be also overseas investment vehicles as well. Trustees are also eligible to transfer their business real property in their funds. Trustees can take advantage of the knowledge and experience that they have in order to control their funds daily and have comfort their money has been safely invested. Self-managed superannuation funds can be used for a tax planning tool with the lowest tax rate of 15% given and offsetting if it is applicable, because, it is exactly a portfolio of member or members. If any change comes effect in tax legislation. Experts of members can immediately act to change strategy instead of what providers of superannuation will do something in accordance with new legislation. Tax losses could be left to the next generation then the next generation may use to make any gains so that it has tax effective as a whole. Disadvantages of SMSF’s

However, setting up such a fund is required to major financial decisions and members do need to make time and skills to manage the funds. Investment expertise is required when it comes to run self-managed super fund. Even the control of it can be on a financial planner, members need to keep looking at what is occurring with the investments at the end of the day. The time is also required to manage could also be another burden unless members have plenty of time. All responsibilities are on the shoulders of the trustees. Therefore trustees have to find professional advisers and accountants in order to achieve high returns for their retirement. However there may be always better options than your decisions. Perhaps decision made by trustees can damage retirement savings in the long run. Therefore it would be disadvantage. Either way professional advice is necessary on this matter in terms of being comfortable with the funds Another disadvantage is that it would be more costly if the amount in the fund is less than $250,000 it is because accounting and Audit fees are typically not based on the amount in super fund. It means paying out a large percentage of your fund for administration fees unless trustees have extraordinary skills to make huge returns with less amount of money. All superannuation funds have to comply with certain rules and certain deadlines apply regarding to comply with the requirements....
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