Self-managed super funds (or SMSFs) are a popular option for people who want to remain in control of their investments. But don’t be fooled into thinking it will be cheaper than paying fees to a superannuation provider. SMSFs have many compliance requirements requiring outsourced expertise – including professional financial advice. Here’s why.

SMSFs must provide retirement benefits!

SMSFs need to provide retirement benefits for all members. As a result, each member of the SMSF is likely to have different retirement dates and therefore, different risk profiles. When determining what your SMSF will invest in, each member’s risk profile must be considered and every investment decision must be in the best interests of all members.

In other words, you can’t use your SMSF to purchase a family holiday house, expansive wine collection or other personal assets. Rather, the way you invest must align with the investment objectives and retirement goals of the members.

Every SMSF is legally required to have an investment strategy in place

Investing in property is a popular investment strategy for SMSFs – especially in the Sydney property market. But like any investment strategy, diversification of investments is important to optimise returns and reduce risk. This means more than purchasing properties in different locations. It means spreading your investments across different investment categories such as shares, government bonds etc.

That’s why Australian super laws require all SMSFs have a written investment strategy. This strategy needs to be implemented and regularly reviewed. In addition, the investment strategy needs to explain how the investments will meet the retirement objectives of each member and consider factors such as:

  • The likely returns that will be received
  • The risks associated with each investment
  • The liquidity of the SMSF’s assets
  • The fund’s ability to pay benefits and cover the costs associated with running it

While you may be able to meet these legal requirements yourself, we recommend you obtain professional investment advice as part of your SMSF’s set-up and ongoing management.

What if you want to use your SMSF to invest in property only?

Sometimes, people set up SMSFs with the dominant intention of investing in property. While there may be cash flow and other considerations with this strategy, it is possible to do so. However, to be compliant, you must formally note that the SMSF trustee(s) have decided to skip professional financial planning advice in the minutes of a meeting of the trustee(s).

We are here to help you manage SMSF tax planning and compliance. Let’s get started by booking a time to chat.