Having an SMSF (self-managed super fund) may be well worth the investment, but it can be a hassle to manage effectively without the proper self-managed super fund investment strategy.
Whether you have an established SMSF or are looking to get one in place, here are a few notable things to keep in mind for effective self-management.
1. Get The Assistance Of a Qualified SMSF Specialist Advisor
Unless you fully understand every facet of self-managing your super fund (and even then, a second opinion could help), seeking assistance from an SMSF specialist is generally the way to go.
Being the Controller of your SMSF, you’re placed in the trustee role and must therefore abide by the rules that apply to anyone holding that position.
As stated by the ATO: “You are the person in control, and if you make a mistake, there can be serious penalties,” which extends to making investment decisions for the fund. You’re directly responsible for complying with designated super and tax laws.
As a reminder, an SMSF must be run to provide retirement benefits to its members and their dependents, and the ATO will periodically check the compliance of your fund with what is known as the “Sole Purpose Test.” In addition, all decisions made as a trustee of your SMSF must be in the best financial interest of each of its members.
Given the complexity in this area, having a qualified SMSF advisor from a reputable wealth management service is a wise move. Apart from the benefits of having an advisor on board for investments and finances, they can also ensure that your SMSF complies with the ATO’s rules and regulations.
2. Regularly Review And Update Your Fund’s Trust Deed
The trust deed is an SMSF’s most essential document, as the contents of the deed govern what trustees are allowed to do.
Having an outdated trust deed is a severe liability, as a trustee may act in a way that is a breach of trust despite legislation stating otherwise, which may lead to beneficiaries seeking recompense from trustees for damage and losses.
As such, it’s vital that you regularly review the trust deed and modify it per updated legislation or other factors.
In brief, you should review the trust deed of an SMSF when there has been:
- A change in legislation.
- Recent court cases and decisions regarding SMSFs.
- A shift in member circumstances.
- Third-party requirements.
3. Do The Appropriate Amount of Research Into SMSF
Even with the best financial planner in Melbourne assisting you in running an SMSF, decisions ultimately rest on the trustees themselves. As an SMSF trustee, you should take the time and effort to educate yourself on the basics.
This includes familiarising yourself with activities such as researching SMSF investment options, setting and following an investment strategy, record tracking and administrative work, and arranging an annual audit by an approved SMSF auditor.
Briefly, success in your SMSF strategy will depend upon adequate research and meeting the compliance in the following areas:
- Does the trust deed allow it
- Check the Corporations Act
- Check the Superannuation Industry (Supervision) Act
- Check the Tax Act
- Appropriate compliance documents
The most important aspect you should familiarise yourself with in SMSF investment strategy is the trust deed and whether or not the deed allows a specific action to be made.
The best way to go about determining if the trust deed allows for an action to be made is to make a list of what you would like the fund to be able to do for you and your family, such as:
- Greater investment flexibility and control
- More effective tax management
- Provide a secure income in retirement
- Greater assurance in estate planning
Once you’ve established what it is you want from your fund, you can consult with an SMSF specialist from a wealth management service to discuss the “Yes and No’s” of your trust deed and what can be done for your fund to provide the benefits you would want it to.
There’s a lot that goes into making an SMSF fund work. One important thing to note is never to treat your SMSF as a static entity. There are plenty of changes from legislative, markets and even personal circumstances that require you to be diligent in reviewing your fund and the trust deed.
With proper reviewing, a firm idea of what you want from your fund, and some advice from a wealth management service, you’ll be able to get the very best benefits from your fund.