Unpredictability seems to be the byword for modern day living. It's little wonder that many people are concerned about their future and especially when it comes to their finances. If you are having a long, hard look into your crystal ball, you may be considering whether or not you should be managing your own superannuation fund. What details do you need to consider before taking these steps?
It is certainly possible to handle all these issues yourself using what is known as a self-managed superannuation fund, also known as SMSF. This will enable you to control what funds you have in your retirement to a large extent. However, you will need to have a certain amount of superannuation in a fund already, or be in a position to add a significant top up, in order to justify the costs you will encounter when doing this.
Are You Ready for It?
Remember, self-management can take up a certain amount of your time. Consider whether you feel you are ready to be the trustee of this fund, as there are a number of tasks involved. In addition to monitoring the market so that you know what the best investment strategies are, you'll need to conform to statutory deadlines for tax reports. In short, you need to be able to adapt should you need to change direction and be willing to handle all the paperwork.
What Is the Purpose?
One of the questions regulators ask is whether or not the entire fund and all associated assets are to be used specifically for retirement fund benefits. This is known as the "sole purpose test" and is a key factor considered by the tax people. It is possible for you to bequeath the benefits, however, or pass them on to another member of the family should you become disabled in some way.
Bear in mind that a fund like this has to be established in Australia and has to be under the control of trustees who are resident in the country. Most of the assets need to be held by Australian residents, too.
The Eligibility Test
In certain cases, you may not be eligible to become a trustee of a fund like this, although most people would pass the test. In particular, if you've been found to be mentally incompetent or guilty of certain offences, you may not be able to proceed. Also, if you are an undischarged bankrupt then you are ruled out.
If you still have questions or are not sure whether it is "for you," have a word with a qualified accountant, preferably one who specialises in this type of SMSF funding.Share