Brisbane accounting firm Wilson Teis' SMSF services will get you from set-up to investment strategy, and keep you compliant with administrative and accounting support.
Self managed super funds (SMSFs) have surged in popularity with more than a million registered trustees managing over 500,000 separate SMSFs with an asset value of more than $500 million by the end of 2014.
Greater flexibility means younger Australians are opting for SMSFs with over 40% of new fund members in the December 2014 quarter were aged 44 or under, while more than 50% of new members in same period earned less than $80,000 per annum.(1)
What is a self-managed superannuation fund (SMSF)?
Australians save for retirement with superannuation. Setting up a SMSF means taking on the role of becoming either an individual trustee of a super fund, or the director of a company set up to be the trustee of a super fund.
Once established all investment decisions, fund administration and regulatory compliance becomes the responsibility of those appointed trustees. Learn more about SMSFs here.
What are the benefits of a SMSF?
More Australians are choosing SMSFs as a route to owning investment property; now even easier since the legislation allows SMSFs to borrow money.
SMSFs let you take control of investment decisions, decide where to invest, and offer a wider choice of investment options besides property.
You can also combine your super assets into a single SMSF as a family to save fees and reduce administration.
Making Super investment decisions
What your SMSF can invest in is set out in your trust deed and your investment strategy as well as the law but can include:
- Investments such as shares, terms deposits and bonds
- Property – residential and commercial
- Managed funds and unit trusts
- Land or even a hobby farm
- Non-traditional assets such as coins, precious metals and stones but conditions apply
How much Super is enough?
At the heart of any investment strategy is asset growth. Rental income as well as capital growth makes investing in property a popular choice for Australian SMSFs.
But it's essential to consider a range of investments to offset risk.
To make SMSFs a cost effective choice that lets you invest in a diversified portfolio as a general rule you need at least $200,000 in existing super savings.
Any less and your SMSF fees will be higher than the fees on a typical retail, industry or corporate super fund. Which means those rental returns will be quickly swallowed up.
Wilson Teis can help you determine the best portfolio structure for your SMSF through its sister company WT Financial.
What can I borrow?
Banks generally allow SMSFs to borrow around 65-80% of the value of an investment property.
But it's better to have at least a 50% deposit so the property is positively geared (i.e. your rental returns exceed all property costs including servicing the loan) or close to it. The following example illustrates:
James and Nicole both in their 40s own an investment property as well as their home. They decide to invest in a SMSF and buy an additional property with the fund.
They have $350,000 in existing super funds, $150,000 of which is invested in shares which pay dividends, and they roll these funds into their SMSF. They are employed and their super contributions go into the new fund.
They use $200,000 as a deposit on a $450,000 property and borrow the remaining $250,000. Rent from the property and other fund income covers the loan payments and other property costs.
Tax-deductible personal super contributions, salary sacrifice contributions, and compulsory super guarantee payments made into your SMSF, can also be used to cover loan repayments.
Steps to SMSF set-up success
SMSFs are regulated by the ATO and setting up your fund properly is crucial or you could lose tax concessions, reduce retirement benefits, incur penalties, or just add to the administrative burden.
Set up involves among other things deciding on structure, appointing trustees, drafting a trust deed, registering with the ATO, drafting an investment strategy and making decisions for the future. Learn more about setting up a SMSF here.
Trust in Wilson Teis
Getting your SMSF set up is just the start. Simply managing a fund as well as making investment decisions that maximise retirement benefits for all members can be a challenge.
The Wilson Teis family of companies can help you tackle that challenge with administrative and accounting support as well as investment strategy support.
If you are looking for the control and flexibility of a SMSF but not the administrative responsibility we can help with:
- Setting up your SMSF fund
- Assisting an investment strategy
- SMSF accounting including preparation of financial statements, members reports, tax returns and audit
- Ensuring your fund is compliant and keeping up-to-date with ATO rulings and legislative changes
- Undertaking the administration requirements.
Wilson Teis can offer you end-to-end support in making sure your retirement savings are secured into the future.
(1) ATO. https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics/SMSF/Self-managed-super-fund-statistical-report---December-2014/?tpissue-07-2015=&page=2#Tables