McEwen Investment Services has 20 years of specialist expertise in SMSFs. We can help you decide if an SMSF is the best option for your retirement savings. And if you choose to run with an SMSF, we can help with all aspects of doing so – from setting up the SMSF, administration and managing investments, to arranging accounting and audit activities.
Read further to learn more about SMSFs, how they feature in the Australian superannuation landscape and the reasons many Australians choose to have one.
A self-managed super fund, or SMSF for short, is a do-it-yourself super scheme designed for those who want direct control over their retirement savings and investments. An SMSF can currently have up to four members although the government is considering increasing the maximum number to six. SMSFs are a common vehicle for super savings with almost 600,000 SMSFs in Australia holding approximately 27% of total super sector assets.
SMSFs are operated, managed and controlled by the trustees of the fund. Fund trustees ensure the fund is managed for the benefit of members and in accordance with the legally-enforceable rules set out in the fund’s trust deed. An SMSF must meet the definition of section 17A of the Superannuation Industry Supervision Act 1993 (SIS Act) to benefit from tax concessions. The trustee requirements for an SMSF are different depending on whether the fund has one or more members. In most cases, individual trustees will be members of the fund, or a private company set up with the purpose of being the trustee.
Given the set-up and ongoing administration costs associated with SMSFs, they also have larger average individual member balances than other super fund types, with each member averaging a balance of around $650,000. A two member SMSF has on average an estimated balance of $1.2m in assets. The average SMSF establishment balance for the 2016/17 year was $521,000.
The reason why so many Australians have SMSFs is because of the benefits of establishing, investing in and operating an SMSF;
- They allow trustees full control over the investment strategy of the fund, including the range of potential investments and the timing for the purchase and sale of assets.
- They provide greater transparency compared with managed funds, where specific investment disclosures at any given time are limited.
- They are cost effective and will, generally, have lower management fees overall. This is dependent on the balance and for small balances, they are not cost effective.
- They offer greater flexibility and provide for multiple members to run a mixture of accumulation and pension accounts.
- They provide for more flexible and effective tax management of income and capital gains, particularly when moving from accumulation to pension phase.
- They offer the ability to purchase business premises within the super fund; and
- They give greater scope for estate planning.
Given the number of already established SMSFs in Australia and the number of funds continuing to be established, setting up an SMSF is a relatively well-worn path. However, to ensure you have a trust deed that meets your needs and statutory requirements and that the trustee is appropriately appointed, the process to commence an SMSF requires careful handling.