The Self Managed Super Fund Strategy

Most people by now have probably heard a bit about self-managed super funds or SMSF’s for short, as they’ve become the biggest and also the fastest-growing segment of the superannuation market in Australia. There are now more than a million Australians with an SMSF. For those of you who have not yet taken the plunge. I thought I’d try to give you an idea of how they work and maybe untangle a bit of the mystery and misconceptions surrounding SMSFs.

Get Professional Help

The initial paperwork is usually done by a financial adviser. The documentation can be significant, especially if you’re setting up the structure, but at the end of the day it’s just a pile of paperwork similar to a mortgage or loan documentation. Getting professional help can ensure you don’t make any mistakes or break any rules. It can also make the whole process a lot easier, as you’re dealing with someone who knows how to set the whole thing up from start to finish. The documentation includes the trust deed, which is essentially the rulebook for the fund, and it’s a bit like purchasing a company structure off the shelf. It’s not like you have to have a law degree or write your own deeds from scratch.

Combining Your Assets

For a lot of people combining their assets can lead to cost savings and can allow them to consider the purchase of assets that they couldn’t have managed alone. There are many reasons people cite for going down the self-managed path. For some people having an SMSF is about reducing fees. Some people go down self-managed path because it’s the only way you can buy an actual property with their super money. Since 2007, the changes to the rules allowing SMSF to borrow have meant that members can combine their super fund with their partner and borrow money from a bank to build up their retirement savings. So, instead of having $200,000 working towards their future goals, they might have five or six hundred thousand dollars working for them with zero capital gains tax to pay in retirement. This strategy can have a significant effect on your long-term results and your standard of living in retirement.


Whenever you think about super funds, the next thing that comes to mind is control, it’s easy to see how with the GFC, a lot of investors got disillusioned rightly or wrongly with how their money was being managed. Within your SMSF you not only have control of what investments you purchase. You also have control of the timing of the buying and selling of your investments. Unlike a traditional superfund where a fund manager will be buying and selling stuff all the time, with an SMSF you get to choose the timing of when shares and property are bought and sold this can reduce the funds income tax for the year from 15 % down to zero in some cases if you have significant write-off such as your insurance premiums or depreciation on a property etc, but the biggest potential tax savings is capital gains tax, as it is possible to pay zero capital gains tax on an asset sale if the asset is held through a retirement phase.

Set up a Separate Bank Account

There are also limitations on what type of investments you can own in the fund. For instance, not all properties qualify and you won’t be able to improve the value of the property if lending is involved, i.e doing renovations, etc. You need to set up a separate bank account in the name of the fund. The bank account forms the central hub of the fund, it’s where the contributions are paid into, and it’s where fund expenses are paid out of.

Establish Insurance Cover

When rolling over your existing super fund into the SMSF be sure to establish insurance cover in the SMSF first, you don’t want to close down your old super fund and lose any attached insurance only to find that, due to some medical reason, you are now unable to get insurance from another provider, your advisor can help you with this.

Establish an investment strategy for the fund. It is a requirement of the ATO to establish appropriate rules surrounding the investment and insurance needs of the members. This is another area where you can benefit from professional advice. SMSF aren’t for everyone, but it’s certainly good that Australians have the option of taking control of their retirement assets to suit their specific overall financial and personal objectives.


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