Understanding superannuation basics.
Right here in Australia, we’re kind of forced to save for the future through superannuation. And that’s a good thing, because a lot of us would have probably squandered all of those extra payments during our 20’s.
Essentially, if you have a job in Australia, your employer will be putting money into your Super account for you. For many Aussies, Superannuation will become their biggest asset over their lifetime – so why don’t many people pay much attention to it?
It’s because most people don’t understand it. They know it’s their money, invested in shares, property and insurance – but that’s about the level of comprehension an average Australian has of their nest egg.
But why wouldn’t you want to take interest in the one thing that secures your future and dictates when (and often where) you can retire!
For a lot of Australians your Superannuation becomes your biggest asset. So yes, it’s really important to take an interest in how much you have, what it’s doing for you and how much you will have when you are ready to retire.
So, what is SMSF?
A SMSF is one of the best tools available to allow you to build a comfortable future. It’s a tool that puts you (or people who you trust) in control of your future. You and your advisors can decide what you invest in – and is one of the best tax planning tools available.
It enables you to build your super balance your own way, and has historically out performed Industry super funds (plus, the fees you pay are lower!)
What does that mean?
A SMSF is a separate legal entity with rules that need to be followed – much like your current industry superfund.
So the first thing to understand is you can’t just do whatever you want with your Super when you have a SMSF. You are still governed by the same superannuation laws.
Each SMSF needs to have a Trustee. We always recommend this being a Company. The members of the Super Fund are also the Directors of the Trustee Company. This is normally a marriage or partnership, but can often be up to 4 people.
What happens on a day to day basis?
Think about your SMSF just like a portfolio. You can do as you please! Do you invest in shares, managed funds, commercial or residential property, term deposits or even in commodities. You may have particular goals for your retirement, and the way you set up your superannuation can make such a difference.
A SMSF allows you to have control over all the investments you make, when you make them and how much each of those investments are for. The main benefits of a SMSF are the flexibility in how you invest, the ability to reduce your premium fees you’re currently paying in insurance and the ability to have reduced fees, as Industry funds are there to make a profit first, and look after you second.
The investments need to be for the express purpose of providing for your retirement. It’s a form of forced saving, but the difference with a SMSF is you get to take back control of your future.
To sum it all up
Imagine heading to Coles and being told what you can and can’t buy, what brands you must have and then being charged for their advice.
Doesn’t sound optimal, right?
That’s essentially what an Industry fund does. Get back your freedom with a SMSF and decide how you want to live in the future!
Because nobody likes being told what to do!
