Has the investment performance of your retail or industry superannuation fund been a little lacklustre of late? Do you look at the investment mix and wish it were not quite so conservative? Do you think you could do better and that it may be time to start your own SMSF (self-managed superannuation fund)? While you are not alone in thinking that, you may be surprised to know that these are not the best reasons for setting up your own fund.
There are some other factors that may impact on your decision. For example, have you any plans to live overseas permanently in the future? To qualify for the 15% tax concession rate and remain compliant, the SMSF trustee must be an Australian resident, so this arrangement would not suit a non-resident or someone planning to relocate overseas permanently.
Also, the ATO (Australian Taxation Office) has some eligibility criteria around the person or persons who can operate as trustee of an SMSF. The most common exclusions are people who have been convicted of an offence involving dishonesty, have been subject to a civil penalty order under the super laws, are insolvent under administration or been disqualified by a court or a regulator.
If none of these factors applies to you, and you still think you have what it takes to manage your own fund, the best reason for proceeding has nothing to do with timing. Instead, it is to take advantage of investment choices and strategies that ordinary industry or retail funds cannot currently provide.
For example, you may have had your eye on an investment property so having your own SMSF will allow you to borrow in order to purchase it. If you own or operate a business, you can also purchase business real property and lease those premises for the purpose of conducting business.
The other important factor you must consider carefully is the question of cost. There is a great deal of administration, management and ongoing reporting to keep your fund compliant. For it to be worthwhile, you must be satisfied that the administration and investment management fees of your SMSF are less than would be incurred in an industry or retail super fund.
This is particularly important if you are thinking about using a professional organisation such as SMSF Assure to assist you. They handle every aspect of the paperwork involved in the set-up process, and continue the ongoing administration of your fund, ensuring that all reporting deadlines are met and compliance is maintained.
With the assistance of professionals such as these, and an investment strategy developed with a licensed financial advisor, this could be the perfect time for you to open your SMSF.