Self Managed Super Funds.
During the last six months or so I have received a lot of phone calls about self managed super funds. There are a lot of retirees out there who want to know how to use their self managed super fund to purchase property and borrow to fund other investments.
I need to point out that I am not an expert in this area but I thought it would be worthwhile to summarise exactly how self managed super funds work and point out some issues when it comes to borrowing money.
Most banks and lenders will approve home loan applications for self manage super funds but the real issue comes in managing the fund itself.
Let’s look at some of the issues you need to know about.
Effectively, self managed super funds allow you to take over the management of your superannuation investments for your retirement. If you sat at one of these funds yourself you will be completely responsible for it, meaning that you have to report to the Australian Taxation Office in the appropriate way.
Here is a link to the Australian taxation office website which gives you all the information you need.
Self managed super funds work in much the same way as any other superannuation fund does. The real difference lies in the fact that members of a self managed super fund are the trustees and this means that the members run it for their own benefit.
But, these funds after everyone and you certainly need to take a lot of advice before making a final decision. It is a major financial commitment and you have to make sure that you have sufficient time and skill to run it properly.
In fact, financial advisers may be able to show you some better ways to manage your money, but any case you certainly need to get professional advice.
Self managed super funds are run according to the terms of a trust deed and the laws and rules that apply to them. The sole purpose, as we stated before, is to provide retirement benefits to fund members.
The fund’s investments must be managed in the best interests of members and in accordance with the law. This means that you have to keep your personal investments separate from those of the fund itself. Remember, the fund can be audited at any time so meticulous records need to be kept in respect of every undertaking and every transaction.
Contributions can be accepted from members but there are always restrictions. Depending on the members age there are certain contribution caps that limit how much can be accepted, and assets can never be contributed except in certain circumstances.
One of the greatest impositions you will experience as a self managed super fund administrator is that of accurate record-keeping, reporting and administration.
As the administrator of the fund, you will need to arrange an annual audit and keep records in accordance with Australian Taxation Office rules and you also have to report to the tax office about the fund’s operation.
When it comes time to access your super, you need to remember that the payment of benefits is only allowed when a member reaches their preservation age and they meet the specified conditions of release. This normally means retirement.
In some cases superannuation can be accessed before this event but it is limited to certain circumstances such as death or terminal illness.
The taxation regime that applies to self manage superannuation funds is quite attractive in that the fund is taxed at a concessional rate of 15%. Naturally, the fund has to be what is termed, ‘complying’ and you need to consult with a superannuation expert to make sure your fund is in the right category.
If the fund is not compliant than much higher rates can apply to the income and investments which accumulate above the contribution caps.
When it comes time to wind up a self managed superannuation fund, for instance where all the members and trustees have left and benefits have been paid out, you have to be certain to comply with the Australian Taxation Office requirements and that you report it accordingly.
All in all managing your own superannuation fund is a huge responsibility and you have to decide whether you are in a position to invest the time and energy to fulfil all the statutory requirements and spend time seeking professional advice to ensure you don’t fall foul of Australian Taxation Office rules and regulations.
In fact, the Australia Taxation Office advises that if you are not confident after seeking advice from a professional, you could be better off with a different type of fund.
Self managed superannuation funds can be a great vehicle to take control of your retirement plans and you may be looking for investment loans to suit.
Remember you can call me at any time to talk about your self managed superannuation fund investment opportunities and I will point you in the right direction.
