Avoid The Seven Deadly Sins of SMSF

Self managed superannuation funds can be very complex and have many rules and regulations that members need to adhere to.  Ensure that you avoid the seven deadly sins when it comes to self managed superannuation with our seven tips below.


1. Opening a fund without sufficient balance
Unless you have a large sum of money coming that you expect to invest into your super in the short term future the fee structure of maintaining a Self Managed Superannuation Fund will erode away at profits and may also effect the start up capital.  The general rule of thumb for a minimum deposit size for a Self Managed Superannuation Fund would be $100k, this would only be on the provisor that the fund will be used for a highly aggressive strategy with a longer time line for the fund.

If there are a large number of members that are contributing to the fund with frequently largely sized contributions this can justify the use of a self managed superannuation fund.  Just remember that generally it costs around $2,000.00 per annum in auditing and upkeep for the fund as well as a general 1% investment fee.

2. Opening a fund with a low balance and low member incomes
This is a similar situation to rule number one, if the contributions are small with a low number of members the fund may not get the boost it needs to be able to justify the fees associated with self managed superannuation funds. Some members may expect to have large rollovers come into the fund soon such as inheritance.

3. Opening a fund with little knowledge of even the basic SMSF rules
Self managed superannuation funds are very complex, if you do not know the basic rules of a fund and you are not using a fund manager you are asking for trouble! As the number of self managed superannuation funds increase rapidly the ATO and self managed superannuation regulators will begin to take a stronger position.  Currently non compliant funds can loose up to half of the fund to tax!

The main reasons of funds losing their compliance status is due to providing loans members. Anyone who has just started a self managed superannuation fund whether they have a manager or not that controls the funds should know the basic rules.

4. Drawing on your SMSF for businesses
Similar discussion to deadly sin 3 discussed above, our self managed superannuation funds are not used to fund personal matters for the members of the fund.  While many may be able to justify a small loan for a short period of time there is a total bar on lending restrictions to members of the fund or related parties which may be extended family members.

5. Arranging for your SMSF to own your business premises
There are positives and negatives to this situation. Many small to medium enterprises use this as an effective strategy.

Pros:

• The fund will pay only 15% tax on commercial rent paid
• If the premises is sold no capital gains tax may be applicable

Cons:

• If a member passes the fund may have to pay out death benefits leading to a rushed sale of the commercial premises
• The above factor may effect the business to be lost

There are strategies that can be built to avoid the cons, it is best to speak to an advisor so that they can see what is best for your personal situation.

6. Failing to plan for death or serious illness of a member
If the fund is run by a husband and wife or run predominantly by one member, if that member passes it could have devastating impact on the self managed superannuation fund.  Strategies should be put in place so that all members involved in the fund understand the rules and regulations as well as the funds going forward investment strategy.

7. Opening a SMSF without insurance cover
One of the most important factors is to undergo health check and to have life insurance integrated into your self managed superannuation fund.  When transferring from a superannuation fund which generally do not need health checks, self managed superannuation funds do.

Self Managed Super What are the Advantages?

Individualised Strategies

Greater Rewards

New Options for Property Investment

What is a Self Managed Superannuation Fund?

A Self Managed Superannuation Fund (SMSF) is an option that many Australians are now choosing when securing their control over the fund and investment strategy. They also offer a wider range of investment options, tax strategies that can be employed for immediate returns, and attract substantially lower fees.

What are the options?

Once a fund has been stablished, financial professionals can assist you in choosing the right strategy for your investment including:

• Borrowing to invest
• Estate planning for dependants
• Property investment
• Transition to retirement
• Concessional strategies

New legislation provides new options

SMSF's under new legislation, can gear up  to 80% of their investment. This means a 20% deposit is all that is needed for purchasing an investment property.

Australians who have a fund of $100,000 AUD now have the means to purchase an investment property, as this amount covers the initial layout for a purchase of up to $400,000 AUD.

Real estate can be a great move for an individual, providing returns at around 10-15% which is much higher than leaving your money in cash, which may not hedge against inflation. Investing through residential property on your SMSF also gives a tax efficiently 70% off the purchase price.

SMSF property investments are also flexible and not restricted to purchases in Australia. The US government economic stimulation plan is beginning to show signs of progress and stimulus has been through the implementation of fiscal policy. Interest rates have been cut back from as high as 5.2% to 0% combined with the buy back of government treasury bonds.

What is the best option for me?

SMSF's are not for everybody, however if you have a minimum $100K in superannuation, then you are more than likely to enhance your financial situation with a SMSF.

Financial decisions do require careful consideration, and investors will need accurate and current information to guide them through the process. The good news is that the more options are now available to provide strategies that are unique to your own individual needs and interests.

Synergy Investments & Capital are available to discuss these options and support you through the process of investing and purchasing property through a Self Managed Superannuation Fund. We have the time, knowledge and experience to help you make the right choice.

www.synergyic.com.au

General Advice Warning

The contents of this post have been prepared without taking account of your objectives, financial situation or needs. Because of that you should, before taking any action to acquire any of the financial products mentioned on this website or to transfer your personal business to Synergy Investment and Capital, consider whether that is appropriate having regard to your own objectives, financial situation and needs.

You should obtain the Product Disclosure Statement relating to the relevant financial product mentioned on this website (which contains full details of the terms and conditions of the relevant financial product) and consider it before making any decision about whether to acquire the financial product.)

A Product Disclosure Statement relating to the financial products mentioned on this website is available on request by calling us on 02 93752252, or by visiting our Product Disclosure Statement Listing

New SMSF rules sparks interest in investment property

Under new legislation Self Managed Superannuation Funds (SMSF’s) can now gear up to 80% of their investment.  With the relaxation on the laws a 20% deposit is all that is needed for purchasing an investment property.  With a starting size of a SMSF at $100,000.00 AUD, this covers the initial layout for the  investment property purchase for up to $400,000.

With the current volatility in the market due to defaults in Europe, Japan and the GFC. Real estate can be a great move for an individual giving returns at around 10-15% which is much higher than leaving your money in cash which may not hedge against inflation.


Investing through residential property on your SMSF also gives a tax efficiently 70% off the purchase price.

While SMSF’s are not for everybody if you have a minimum $100K in super or $100k combined in superannuation then you are more than likely to enhance your financial situation with an SMSF.

With the flexibility of a SMSF property investments are not just linked to investing in Australia.  The US government economic stimulation plan is beginning to show signs of progress. 

Stimulus has been through the implementation of fiscal policy. Interest rates have been cut back from as high as 5.2% to 0% combined with the buy back of government treasury bonds.  For further information on investing in the Austalian or US market contact Synergy for a range of Synergy investment approved properties.

Find out more about your investment property options today