Diy Superannuation Fund Tips
1. Get an up to date, non restrictive trust deed
The trust deed of your fund is where it all starts as it is essentially the governing rules of your fund. It tells you what you can and cant do. If your doing something that your trust deed does not allow, then youve got a serious compliance problem. Pretty much any trust deed that was written pre-July 2007 (due to the many law changes that happened then) runs the risk of giving you serious issues. So make sure you have an up-to-the-minute, non restrictive trust deed that enables you to carry out any and all of the latest SMSF technical and investment strategies.
2. Explore all your investment options but also understand the restrictions
In retail or industry super funds, its all about managed funds and maybe some direct equities if your lucky. SMSFs on the other hand can invest in almost anything and any strategy that you can as an individual. Explore strategies like writing covered calls, or even direct property (see next item). However there are restrictions in how you invest. These include the sole purpose test, in house assets test, acquiring assets from related parties, loans to members and related parties, charges over assets, and keeping all transactions at arms length. Get familiar with these and stay compliant.
3. Be strict with any gearing in an SMSF for property investment
Following on from number 2 above, the investment strategy of investing in property in a SMSF has suddenly become much more viable since the recent introduction of the limited recourse borrowing provisions in the SIS Act. As property is a big ticket item, borrowing is often required. If this is something you want to pursue for your investment strategy, be aware that there are very specific requirements in how you must go about it for it to be 100% compliant. Its not like ordinary borrowing.
4. Consider establishing reserves
A reserve in a SMSF is just an amount of money or assets within the fund that are not part of any members account. They can be used for a few purposes, such as smoothing out the investment returns of fund members, warehousing contributions for a short period of time over the 30 June period where contribution limits are a problem, self insurance, or for future use within what is commonly known as the anti-detriment strategy where a payout occurs on the death of a member, and the fund receives significantly large tax deductions that can be carried forward.
5. Create an SMSF estate plan, and take out insurance to fund it if required
Put in place a plan (and the appropriate documentation such as a binding death benefit nomination) to ensure your remaining family members are looked after in the most tax efficient manner in the event of your death. There are some fantastic strategies that can be implemented, especially for minor children, which is very important for young families where the plan is often funded via life insurance.
6. Understand exactly how your annual SMSF admin is charged and what your getting
There are significant differences in how your annual SMSF administration (including audit) can be handled, and how the fees are calculated. Make sure you know (ask) how your fees are calculated (flat dollar, or based on number of transactions, or number of investments etc). Think about whether or not this fits with how you run your fund, or is there a mismatch. Also, what is included in the package ? Is it just basic end of year admin, or does it include extra benefits such as daily admin, advice, or technical assistance etc.
by: Graham Parkes
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