Are you thinking about setting up a Self Managed Super Fund (SMSF) but wondering about the best possible way to make it happen? 

An increasing number of individuals are establishing SMSFs and adding assets including property to their funds.   

Like any strategy, success will depend on the quality of the implementation.  To obtain best practice insights, Debra Beck-Mewing from The Property Frontline spoke with Lina De Marco, Director of Ademus Business Solutions. 

What are the benefits of setting up an SMSF? 

There are many benefits of setting up an SMSF but the primary benefit is having control over your retirement savings, including the investments within the fund. This allows you to tailor an investment strategy that suits your circumstances.  

With an SMSF, more flexible strategies are available than those which exist with retail super funds including the ability to buy and sell assets quickly. An SMSF also : 

  • allows you access to a wide range of investment options, including direct shares and direct property. In some circumstances the fund can purchase assets from members of the fund, allowing better consolidation of investment assets. There is also the opportunity to purchase a commercial property which members can use in their own businesses. 
  • can be tailored to meet your own personal circumstances in relation to estate planning.  
  • can be used as a vehicle to accumulate superannuation benefits whilst employed and can be maintained well into retirement and beyond and throughout generations, particularly where there are other family members in the fund that can join such as children.

How is an SMSF established? 

Firstly we meet the client and complete a financial fact find so we can determine if a SMSF is the best option for a client’s retirement savings. Once we have completed that we prepare a statement of advice with our recommendation.  

If the client wishes to proceed we establish the legal structure and prepare all the corporate documents. From financial fact find to set up the structure takes about a week. When the legal structure has been established we open a bank account for the SMSF and commence the application process for the funds to be rolled out of the retail funds into the SMSF. This process can take a few weeks as we need to rely on the processes of retail funds. The retail funds usually will deposit the rollover directly into the SMSF bank account and the funds are then ready for investment. The whole process can take 4 to 6 weeks. 

What’s involved in the ongoing management? 

Record keeping and understanding the responsibility as trustees is very important. We provide training and guidance on the record keeping process. Especially during the first few years. Every year the SMSF needs to prepare financial statements and lodge a tax return. The financial statements are then audited by external auditors which the accountant will arrange. This is where the record keeping is important as the auditors will require evidence of payments made out of the fund and evidence of investment holdings.  

Can you give property owners a few tips for what works best in an SMSF?

The beauty of SMSFs is that typical investment options such as residential property, commercial property, direct shares, managed investments, term deposits, bonds, cryptocurrency all work well in a self-managed superannuation fund.  

In particular, the property is extremely tax-effective especially when the property is sold while the fund is in the retirement phase as it is capital gains tax-free. This is a significant tax saving compared to a property that is held in a non-superannuation environment. Superannuation funds can also borrow so if you don’t have enough funds for a property purchase outright, the fund can obtain financing for the balance. 

About the author

Debra Beck-Mewing is the Editor of the Property Portfolio Magazine and CEO of The Property Frontline.  She has more than 20 years’ experience in buying property Australia-wide and has extensive experience in helping buyers use a range of strategies including renovating, granny flats, sub-division and development. Debra is a skilled property strategist, and a master in identifying tailored opportunities, homes and sourcing properties that have multiple uses.  She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics.  She is also an author, podcast host, and participates on numerous committees including the Property Owners’ Association.

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Disclaimer – This information is of a general nature only and does not constitute professional advice.  We strongly recommend you seek your own professional advice in relation to your particular circumstances.