In every country all over the world, retirement schemes provide strong pillars for both security and stability needed by every individual in their old age. In Australia, the retirement programme is known as Superannuation and was made popular by the "superannuation guarantee" which was introduced by Keating Labor at the time of his reign of the Australian government.
Superannuation is a fund towards which the employee as well as the employer contributes a certain amount of money at specific time intervals. Although it is compulsory for the employers to make contributions towards this fund (not less than 9% of their employee's income, with commission, bonus, etc included), it is a voluntary affair for the employees to do so. When this fund was initially introduced, it was set at the rate of 3% but with time it has registered a gradual increase. A whole lump sum is released to the employee when he attains a specific age.
A Self managed Super Fund on the other hand, is a superannuation fund that is upheld by a faction of people made up of 5 members who double up as the fund's trustees. The Self managed Super Fund is regulated by the Australian Taxation Office which has made it mandatory for each member to be a trustee of the fund. By the time the fund gains corporate trustees, members of the fund will turn into directors of the very corporate trustee. This system of superannuation does not allow a member to be an employee of another member. If there ever arises any employer/employee relationship between two members or more, then the fund will no longer be regarded as a superannuation fund.
For the majority of the Australians, perhaps super could be among the largest investments, or even the biggest investment they might ever have. It is for this reason that a considerably big number of people put their super money in super funds which are managed professionally. However, there are some people who prefer hands-on control which comes along with the self-managed super fund. This control means there will be extra responsibility and extra workload.
Presently, this fund is extremely popular among individual factions of people and several corporate bodies. This is because Self managed Super Funds offer a broad scope and advantage concerning both your investment and pension funds.
There are a number of advantages of a Self managed Super Fund that can be beneficial to you such as:
• A saving in taxes
• Greater flexibility in choosing an asset or deciding on an investment
• Allows for your absolute management of your investment's portfolio
• Increased flexibility in the utilization of the pension income streams as well as superannuation offers
• Liberty to transfer your shares or securities into the fund
• Opportunity to borrow limited resource if the SISA Act recognizes the asset
Controlling your future
A large number of Australians are taking advantage of this retirement savings option. Why? Because Self-managed Super Funds allow you to have greater control in the choice of your personal strategy and investments. In addition, you can enjoy similar tax benefits just as you would with superannuation through the normal superannuation funds.
The Do it yourself self-managed super
For those individuals who have many superior and broad skills in legal and financial matters, Self-managed Super Funds are most appropriate. Keep in mind that it is your retirement's investment and therefore you need to be cautious about it. You need to be adequately prepared to do proper research and follow your super investments frequently if you are keen on personally managing it.
Before you set up an SSF, it is important to consider certain things:
• Generally, Self-managed super funds are worthy setting up if you have large assets for investment purposes. A regular personal superannuation account is a cheaper alternative for those with smaller assets.
• For a self-managed fund all the trustees are liable as per the law.
• There are a lot of rules and regulations involved as the Australian Taxation meticulously checks the management and the record keeping of these funds. You can consult the professional administration providers who will provide you with the necessary advice that you may need.
If you have a Self managed Super Fund you should remember to take a separate life insurance cover. In order to run it efficiently you will generally need the following:
• A colossal amount of money- about $200,000 in the fund in order to establish and cater for annual running costs.
• Ample time to run the fund
• Financial knowledge and ability to enable you make logical investment choices.
• To allow for operating costs like legal advice, professional accounting, audit and tax
• A separate life insurance together with income protection and total and permanent disability cover
• While you can hire a professional to manage your fund, it is legally impossible to delegate your responsibility of being a director or trustee.