23 March 2021
By AR Advisors Director Kris Elliot
The talk of the town a few years ago, self-managed super funds are still a great option for a wide range of business owners.
First up, what is the difference between a self-managed super fund (SMSF) and a managed super fund in the form of a retail or industry fund?
A SMSF is a private fund that enables you to invest your super balance as you see fit. You might decide to invest in commercial property, residential property, unlisted companies and unit trusts, direct shares, cryptocurrency, or a mix of all the above. It’s your choice.
Not only can a SMSF offer positive tax outcomes, but also there’s scope to match the investment, such as commercial premises, to your business plan.
With a retail or industry super fund, you’re handing over the management and investment decisions, putting someone else in the driver’s seat. If you like the idea of taking control of your super but are worried it’s not as easy as it might sound, we’re happy to bust the myths that might be holding you back.
Myth #1 You need at least $500,000 to make a SMSF cost effective.
While $500,000+ is the ATO and ASIC ballpark, others put the figure at $250,000. It’s all just a guide. What you decide to invest in and why should also be factored in. Using your super to purchase premises to operate your business from, for example, might be justification enough.
Myth #2 The paperwork is time-consuming.
Running a SMSF does take time and you do need to be actively involved. However, the reporting, compliance and auditing requirements become easy and painless when you have a good accounting or advisory team in place. Advances in software are also helping to take the hassle out of the administration and reporting.
Myth #3 You need to know what you’re doing.
Running your own super fund doesn’t mean you’re on your own. Yes, you have control over your investments and should be hands on, but you’ll generally need your business advisor’s help to set up (and wind up) a SMSF and ensure you’re maximising the tax benefits. You’ll also need a formal Statement of Advice before setting up a SMSF.
Myth #4 They’re expensive.
The software available to monitor SMSFs has come on in leaps and bounds in recent years, bringing down the running costs. The costs associated with a retail or industry super fund might not be immediately obvious, but they still add up over the year. Your business advisor can run the numbers to see how the options stack up.
To find out if an SMSF is right for you or to learn more about how we can help your business grow through strategic business and tax planning, get in touch today.
This editorial does not consider your personal circumstances and is general advice only. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.