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Superannuation made interesting

Have you ever dreamed about how you’ll spend your retirement years? I’m planning one that includes white sand, gourmet food and cocktails.

For many of us, superannuation can be one of those incredibly boring topics. However at woman with drive, we’ve decided to see if we can make self-managed superannuation funds (SMSFs) interesting for you. We also encourage women to understand and take control of their financial position. As the government continues to struggle with budget deficits it’s vital that women ensure they have sufficient funds to enjoy a well-earned retirement.

We decided on self-managed funds as a focus because as women with drive we tend to be control freaks and so the idea of someone else managing our future is just not on! At the end of this article we have included some contacts for those who wish to find out more.

What is a Self-Managed Superannuation Fund?

Unlike being part of a big investment fund like MLC or AMP, this fund has limited members – typically you and a partner. You act as trustees of the fund and are responsible for managing its assets. There are almost 500,000 SMSFs in Australia – 53 per cent of members are male and 47 per cent are female. The average value of a SMSF is approximately $1,000,000.

What are the advantages?

If you have the time, interest and talent for investing, you may get better returns by managing your own super. However it’s wise to see this management role as a “job” and allocate a sensible amount of time to the task. You need to consider if your time is better spent in other areas and leave your superannuation to a specialist. A SMSF can also appoint an investment adviser or broker to assist with investment decisions and or the running of the fund.

According to the Australian Tax Office (ATO), about 10 percent of SMSFs invest in property. If you manage your own business, your business is able to rent commercial property that is owned by your SMSF. This means your office rent is going towards your superannuation balance in a tax effective way. It is also important to note that if you don’t have enough money in your SMSF to purchase a property outright, the SMSF can borrow for this purpose.

Residential property can be purchased by a SMSF, however the rental income cannot be received from a related party, ie. holiday homes are generally not an asset that a SMSF can own – assuming it is to be rented to a related party. If a holiday home asset in a SMSF is for investment purposes only and you maintain a steady and reasonable rental income from an unrelated party, it can be considered.

Should you establish a SMSF alone or with a partner?

Many financial advisers recommend you need at least $250,000 of superannuation to make a SMSF worthwhile – and so many people choose to pool funds and create a two member SMSF.

SMSFs & divorce

It’s complicated. Your fund assets may not be able to be realised as a lump sum benefit or pension until you’re 65 years of age. If you are to separate, the fund portfolio will be subjected to the usual division of assets; including independent valuations etc.

If you set up a SMSF with your partner, invest in property then rent it to your business and then divorce, you will probably want to rollover your partner’s balance to another fund. In such a case the amount to rollover could be a significant amount so you would need to have other assets that could be realised to cover this amount.

How do I set up a SMSF?

Your accountant or financial adviser can assist you to set up a SMSF. The costs to set up a fund can range from $400 to $2,000 depending on your requirements. The ongoing costs generally start from $2,000 per year to prepare annual reporting requirements. Another cost that is often incurred is the ongoing investment advice if the trustees do not take on this role themselves. This can often cost from $5,000 per year depending on the assets and size of the fund. The ATO typically also charges an annual fee of $200.

Sources:

Two contacts for more information on superannuation or SMSFs are Rohan Mansfield and Petra Thomson.

Rohan is a chartered accountant who specialises in SMSFs and superannuation.

Rohan Mansfield

McLean Delmo Accountants & Business Advisers

+61 3 9018 4666

Rohan.Mansfield@mcleandelmo.com.au

 

Petra is a family law specialist.

Petra Thomson

Kennedy Partners

+61 3 9618 7319

petra.thomson@kennedylaw.com.au

If you want to read a little more about SMSFs, Westpac’s Ruby Connection website has an excellent article here: http://rubyconnection.com.au/articles/2013/march/adding-value-to-your-self-managed-super-funds-with-property.aspx

 

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