What the heck is a SMSF?

There’s all this hype about SMSF this, SMSF that. But what the bloody hell is a SMSF? Well, in short, it’s DIY Superannuation. SMSF is an acronym for Self Managed Super Fund. So, in its simplest form, a SMSF it’s super that helps you save for your retirement, while giving you more control and flexibility.

SMSFs are about taking control of your investing and improving returns. This can be a daunting task for the uninitiated, but more and more Aussie investors are taking direct control of their super funds, with some unexpected benefits.

Buying property in your SMSF is a smart investment decision.

There have been recent calls in the media to limit or prevent SMSFs from purchasing direct property, which would encumber their potential to accumulate wealth and pass it onto the next generation. Industry Super Australia estimates that over 40,000 private super funds have accumulated over $2,000,000 in property assets.

It suggests that SMSFs are not only a way of directly controlling your Super investment, but are being used as a very successful vehicle for family wealth management and estate planning.

So, should you get yourself a SMSF?

Some experts suggest you need a minimum starting balance of $200,000 before considering a SMSF, while others are strong advocates for starting with just half that. Definitely seek independent advice before jumping on the SMSF train, but there are real and obvious benefits of having one, so I reckon you should talk to your financial advisor.

You must clearly understand your legal responsibilities and the investments that you make, because even if you employ professionals to advise you, you are still responsible for the performance and the legality of the fund.

Who do you see to advise you establishing a SMSF and what investments will be suitable?

There are a number of options when considering who the best person is to advise you A) how to set up a SMSF and B) what to invest in.

Dealing with the first part, accountants, financial planners and solicitors can all help in this process. There are also plenty of courses you can undertake to make sure you are educated in how to legally create a SMSF.

Financial planners need to be certified and hold a financial planner’s license of their own. Many financial planners work under a licensee and are only able to give advice on a limited number of options, usually controlled by the company they work for. Bank based FP’s are a good example of this.

Knowing what to invest in and how they can be financed is critical. Currently in Australia you are allowed to hold shares, property, and collectables (such as artwork, jewellery, antiques, vintage cars and wine, however there are some very strict rules about these items and how they are to used).

Still wondering if you should start a SMSF? If you’ve taken the time to understand your responsibilities, the costs involved and your investment options, it’s worth a shot.

For more information go to www.moneysmart.gov.au