Self managed superannuation

Notwithstanding all the negativity that has preceded, superannuation still remains one of the most important long-term investments for any individual. For the everyday investor, there are many strategies associated with superannuation, and if used wisely, superannuation funds, whether self-managed, industry, retail or other, still boast many advantages for both the employer and the employee with tax planning, savings and flexibility.

While Australia’s superannuation system has become somewhat of a role model in terms of developing a model that delivers retirement incomes for an ageing population, the everyday investor should take their time to understand the alternatives associated with managing their financial destiny. 

Taking Control

In times of volatility, the most sensible step to be sure of your future is to take control of your superannuation. By choosing the right fund, evaluating your investment choice and taking out an adequate level of insurance, you are well on the way to obtaining financial security.

In order to maintain greater control over their financial destiny, many individuals are now establishing self-managed superannuation funds. While the majority of people who do this cite “taking control” of their investments as the driving factor, managing a fund does comes with a high level of responsibility – you need to ensure that your fund is successful, and continues to grow and provide for your retirement.

What’s required

Establishing a self-managed superannuation fund requires a trust deed, appointing trustees, obtaining an ABN and TFN and, of course, sufficient cash to start the fund. In addition, recent changes now permit superannuation funds to borrow, thus adding additional choice to the type of superannuation fund. And no matter how good you are at making investment decisions, some level of financial expertise is recommended, as the consequences of commencing a self-managed superannuation fund without financial expertise can be disastrous.

Superannuation funds can now borrow

Until September 2007, superannuation funds were prevented from borrowing. This all changed, however, when legislation was passed to allow borrowing on a limited recourse basis.

As an everyday investor, you can structure borrowing through your superannuation fund to acquire any asset that is permitted under the Superannuation Industry Supervision Act.

There are many advantages to this strategy if implemented correctly. For instance, if an SMSF acquires a property, by making tax deductible contributions to your superannuation fund, you effectively receive a negative gearing advantage. A properly formed superannuation fund will eliminate stamp duty and capital gains tax.

Don’t rush

It is crucial to avoid making a hasty decision that will actually cost you money. Switching funds to a different asset class will simply crystallise a loss thus forsaking the opportunity to make it up over the long term. As superannuation is for the long term, it should be treated in that manner. Another important and compelling factor is to ensure that you are investing in an asset class that suits your profile.

Find an advisor that recognises the importance of investing in superannuation as a long-term savings plan designed to help you fund your lifestyle in retirement. Ensure  that your advisor is appropriately qualified and has developed solutions that help you grow your superannuation capital, build your wealth and take advantage of the taxation incentives provided by the superannuation environment.

What’s the long term?

Superannuation was designed to operate as a tax-effective mechanism to fund our post- retirement lifestyle and not as the primary vehicle to become financially educated in the investment market. When considering superannuation, take a long-term view.

First choose the right fund that suits you as an individual and then identify an appropriate investment strategy that will protect and enhance the retirement benefits of the members of the fund.