Thinking about an SMSF? Here are a few things you might want to know

Everyone wants to be comfortable in retirement, whether that means luxury cruises and champagne, or simply not having to worry about bills at the end of each month.

Investing plays an important role in funding retirement and for those that want to make their compulsory superannuation contributions work in different ways, an option might be creating a self-managed super fund (SMSF).

Data from the Australian Taxation Office (ATO) shows that there are over 1 million people with SMSFs in Australia, and that the number grew by 20 per cent between June 2011 and June 2016.

If you are considering a SMSF, here are a few things to help you understand what they are, how they work and what your options are to help you decide if a SMSF is right for you.

What is a SMSF?

A SMSF is a different type of superannuation structure which puts you in charge of running the fund for the purpose of providing retirement benefits for the fund’s members or their dependents.

What makes a SMSF different to other superannuation structures is the members are also trustees, meaning they can tailor how the SMSF invests based on their individual needs.

So if the members want to invest in commercial or residential property over shares and bonds, they have that option.

Compare that to an industry or retail fund which is designed to serve a much larger group of members who have less control over the granularity of the investments.

How much does a SMSF cost?

Because you’re running the SMSF, you are also responsible for complying with the super and tax laws, and for paying the fees associated with running it.

This means you will need to appoint an approved SMSF auditor to audit the fund each year and ensure that any audit, administration, accountant and tax agent fees can be covered by the SMSF.

There are also record-keeping requirements and a yearly ‘SMSF levy’ that must be paid to the ATO as a part of the fund’s annual return and audit.

Why have a SMSF?

Having a SMSF gives you extra control of your super, for example you might want to invest in residential property, or a commercial property, or pick and choose the exact shares to invest in.

A good understanding of financial investments is essential and you can achieve this by talking to the right people and doing adequate research.

What can you do if you’re thinking about creating a SMSF?

Even SMSFs are subject to volatility in the market, so shifts in the value of property or shares will affect its performance – for this reason it pays to talk to the right people so you know what you are doing.

There are many things to consider, the first step is to talk to a qualified financial adviser, who can advise you about whether a SMSF is right for you.

If you are looking to invest in property using your SMSF, contact your local Liberty Adviser who may be able to assist you in securing a SMSF loan.

You can find your nearest Liberty Adviser here.