TLP MAG 4 - The Special Edition 2012

finance

Who is Looking After

Your Superannuation?

By Simon Guiliano

Senior Adviser,

Segue Financial Services

www.segue.com.au

We are living in difficult times.

The first ripples of the global financial crisis

were felt in August 2007 and here we are,

almost 5 years on and the world is still in a

state of flux. While it has affected many areas

of the global economy, the common ground we

all share is the prolonged impact it has had on

our superannuation balances.

These difficult times drive home the need to take

an active interest in where your superannuation is

invested, how it is performing and how much you

are paying in fees. Because for most of us, along

with our home, superannuation will be our single

biggest investment when we retire it deserves

much more attention than most of us give it.

It is important to remember that in large

industry or retail superannuation funds, the

trustee of the fund is someone you have never

met, and is controlling not only your retirement

savings, but also those of potentially hundreds

of thousands of other people. Decisions they

make are for the greater good, even if that

potentially means you personally don’t benefit.

There is so much more to superannuation

than simply investments. It is a vehicle to

build wealth for the future in a tax effective

manner, taking advantage of all of the features

a superannuation fund has to offer can provide

untold benefits in the long run.

So, how can you take advantage of all of these

benefits?

Well, one of the key ways is to take over control

of your superannuation. After all, it is your money

(remember though, access, typically is not until age

55). And the best way to take control is via a Self

Managed Super Fund (SMSF).

Latest statistics show that there are over 442,000

Self Managed Super Funds across Australia, and

in the five years to 30 June 2011, SMSFs were

the fastest growing sector of the Australian

superannuation industry. So what is it about

SMSFs that has driven this popularity?

Control

It makes sense to take a much more active

interest in the decision making processes

around your retirement nest egg. In a SMSF,

you control your own strategy- how you invest

your money and where, who you seek for

advice, who you choose to administer the fund

(and the fees you pay) amongst other things.

You can also time tax events (such as asset

sales) to your Fund’s (and your) advantage.

Choice

While many retail superannuation funds do

offer a wide choice of investments, there are

still restrictions. Within a SMSF you can invest

in shares, managed funds, term deposits, real

property, derivatives, collectibles, agricultural

investments…the list goes on. Many people

have their preconceived ideas about which

investments are better than others and a SMSF

enables you to invest accordingly.

Purchase Assets From Members

We know that superannuation provides

generous taxation concessions. For those

who have accrued significant assets outside of

superannuation, it can be a very tax inefficient

way to accumulate wealth. A SMSF has

the ability to acquire particular assets from

members, including listed shares, managed

funds, commercial property and in-house assetshousing

them in a low tax environment.

Real Property

A SMSF can own physical property assets and

lease them to third parties (i.e. rental properties,

both commercial and residential). In addition, an

SMSF can own a commercial property and lease it

back to your own business, providing advantages

such as using superannuation money to purchase

the property and being able to make tax deductible

rental payments in your business which contribute

towards your own retirement. In addition, if you sell

the property when your fund is paying a pension,

Capital Gains Tax can be completely eliminated.

Gearing

A SMSF can also borrow to purchase assets

such as property or shares. This can be an

effective way to boost your retirement savings

in a tax effective environment.

A Family Fund

An SMSF is allowed up to four members; many

families pool their superannuation balances

in the one SMSF that can enable the purchase

of larger assets (such as property), which

would not be possible individually, as well as

consolidation of fees.

SMSFs provide a level of flexibility in passing

on assets to beneficiaries on death. This can be

particularly valuable with blended families where

complications often exist with wealth transfer.

In addition, strategies available through an

SMSF can enable better transfer of wealth from

parents to their children in an extremely tax

effective manner.

Flexibility in Retirement

A SMSF allows the member the flexibility to

structure pension income streams and lump

sums in the best way. This can prove valuable

when selling superannuation assets (and

therefore minimizing tax) as well as improving

eligibility for government benefits such as the

Service and Age Pension.

Insurance

You have a wide choice of insurers via a Self

Managed Super Fund, as well as policy types that

can suit you and your family. You also have more

flexibility as to how insurance proceeds can be

paid out to beneficiaries on death or disability.

As you can see, there are many features

of SMSFs that are not shared with retail or

industry super funds. But they certainly are

not for everyone. It is important to get sound

advice to ensure that you work within the

relevant rules and optimise the opportunities

and strategies a SMSF allows. While they

do require more time and effort, the results

are very rewarding for you and your future

beneficiaries. In a time of dwindling returns

and great uncertainty, a SMSF is certainly

worth considering for your superannuation

needs.