Cash investments popular among investors

Self managed super fund (SMSF) investors have led the market in adopting online savings accounts and term deposits with 29% per cent of self managed super assets moving to cash between 2008 and 2009 - during the GFC.

Post GFC, cash is still maintaining its popularity among some investors. A UBank survey of customers in March 2010 revealed that a third of SMSFs have more than 50% of their funds in cash.

Some of the returns available on cash rates have been quite attractive with the Reserve Bank of Australia increasing interest rates.

Seek SMSF advice

A self managed super fund (SMSF) may have many benefits, for example, it will give you more control over the fund's investment strategy, there is a lower tax payable and all self managed super funds are protected from bankruptcy and other legal claims, but many Australians don't understand the time, risks and costs involved in operating a SMSF.

A survey conducted by TNS found that more than half of Australians thought you could establish a SMSF with a balance of $50,000 or less. One quarter of respondents thought a balance of $5,000 would be enough to set up their own SMSF.

As a note, if you have less than $200,000 in super, the admin costs would probably make setting up a SMSF uneconomical. You can also expect to pay $1,000 to $1,500 a year on running your own super fund.

There has been an increase in the number of self managed super funds being set up, suggesting that Australian's want to exercise more control over their super. However, research shows that only a third of people consult a professional financial planner to decide whether a SMSF is suitable for their needs.

So if you are thinking of setting up a DIY super fund, please seek advice from a professional financial planner first to ensure that this is the best option for you. Factors such as time, money in administering a SMSF and whether you have the desire and ability to manage the fund for the long term all need to be taken into account. For more information about SMSF's, speak to one of the financial planners at Intellichoice today on 1300 55 10 45.

SMSFs spur property investment

Australians are increasingly using self managed super funds (SMSF) to invest in property rather than shares.

According to accountancy firm Chan & Naylor, 'increasing awareness of the potential of SMSFs to borrow and invest is creating new demand for residential property. It seems Australians feel comfortable with property as an investment class,' said CEO Sal Carrero.

Since the GFC, many Australians are questioning whether they could invest their own money better than what their super fund was doing, and this is one of the reasons why SMSFs are growing in popularity.

Furthermore, SMSFs are no longer just reserved for the wealthy, with a minimum of $150,000 super savings enough to set up your own self managed super fund.

If you are interested in setting up your own self managed super fund, need assistance with a SMSF investment strategy or would like more information, speak to one of our experienced financial planners first on 1300 55 10 45 or email info@intellichoice.com.au. Intellichoice also has experienced mortgage brokers to assist with a SMSF home loan if you are looking at buying property through your diy super fund.

What is a self managed super fund (SMSF)?

A self managed super fund (SMSF) is a specialised superannuation trust that can be established for up to four people, for the sole purpose of providing retirement benefits to its members. A SMSF if you own superannuation fund, where you have control of what investments your super fund invests in.

A SMSF needs to have:

• A trust deed: This establishes what the super fund can or cannot do. The trust deed needs to be reviewed regularly to make sure that it is up-to-date.
• A trustee: All members of the fund have to be trustees. You can act as individual trustees, or appoint a company as a trustee, in which case all members need to be directors. Speak to a financial advisor about which is suitable for you.
• An investment strategy: An SMSF investment strategy sets out what the SMSF will invest in and addresses risk, return, diversification, liquidity, cash flow and asset allocation. Seek professional financial advice from a trusted financial advisor first for details on setting out our investment strategy for your super fund.

There are currently over 400,000 SMSFs in Australia and in March 2009, there was nearly $300 billion invested in self managed super funds. This represents about 32% of the whole superannuation industry's investments.

But before you set up a SMSF, you need to take the following into consideration:

• If you have decided to appoint a company as trustee, you will need to register the company to be the trustee and obtain an SMSF trust deed. This can cost you from $800 to $1,500.
• You need to apply for a Tax File Number, an Australian Business Number and establish a bank account in the super fund’s name
• Once this has all been completed, you might like to think about rolling over your existing super accounts into your SMSF. You can also change your payroll details, so that your employer can contribute into the SMSF.
• Appoint an accountant and auditor to prepare your SMSF accounts, tax return and audit every year.
• Once your SMSF has been established, you need to manage it and its investments and keep proper records of all transactions. This will be essential if your SMSF is ever audited by the Tax Office.
• At least in the beginning, you should consider getting advice from a professional financial advisor.

Before you set up a self managed super fund, we recommend that you speak to a qualified financial advisor first to ensure this is the best option for you. Our financial planners are available to answer any queries you may have and help set up your SMSF and investment strategy. Call 1300 55 10 45 or visit www.intellichoice.com.au for more details.

Should I have my own self managed super fund?

There are essentially 2 benefits to having your own self managed super fund (SMSF):

1. Cost
Self managed super funds (SMSF) can be very cost effective. A SMSF will cost you anywhere in the range of $1,500 to $2,500 each year to maintain. In addition, there are a number of fixed costs that don't increase regardless of the size of your super fund. For example, the cost of auditing your SMSF and preparing the fund's tax return will still cost the same regardless whether you have $250,000 or $2 million in the super fund.

2. Control over your SMSF
You can control what your SMSF invests in and when you invest, subject to the fund's investment strategy and the technical rules about SMSF investments.

Please remember that a SMSF is not for everyone and we recommend that you seek professional advice from a financial planner first before setting up your own SMSF. A financial planner will be able to advise whether a SMSF suits your needs or whether using an industry superannuation fund or a retail super fund may still provide you with sufficient flexibility and cost-effectiveness.

Benefits of SMSF borrowing

Below are some key benefits of using your self managed super fund (SMSF) to acquire shares, managed funds or property.

1. Maximises the wealth effect in the SMSF in times when assets of the fund are rising. 
2. The borrowing can be for a short time period or for a period of up to 20+ years (if related party financing is used) allowing it to be structured to the underlying circumstances of the fund members. 
3. SMSF members and related businesses can act as lenders as long as all lending is at arm’s length
4. It increases the flow of non-contribution style funds into the SMSF particularly where the members of the super fund have used up their contributions capacity. Care must be taken to ensure that there is a genuine borrowing and not a contribution arrangement, otherwise the Commissioner may deem the borrowing to be a non-concessional contribution.
5. Future income and capital gains on underlying assets are taxed concessionally in a SMSF and may even be tax free where the assets are held for pension purposes.

If you are thinking about setting up a self managed super fund or would like to speak to a qualified financial planner about a SMSF investment strategy, speak to Intellichoice today on 1300 55 10 45. Intellichoice has experienced mortgage brokers who can assist with SMSF loans.

Gov’t changes good for SMSF borrowers

Budget changes to self managed super funds (SMSFs) will create greater certainty around borrowing to invest in shares and property.

Accountancy firm Chan & Naylor, has backed government measures that will bring greater clarity on borrowing requirements.

“SMSFs are highly effective investment vehicles which should be encouraged and promoted by the government as a means of bolstering national retirement savings and reducing the dependency on government for retirement income,” said chief executive Sal Carrero.

Mr Carrero added that taxpayers with non-complaint SMSFs risk being stung by penalty fees, audits and tax office scrutiny.

If you would like more information about a SMSF and investments, speak to one of the experienced financial planners at Intellichoice on +61 7 3624 1900. The financial planners at Intellichoice will work out with you whether a SMSF is the best option for you based on your needs. Intellichoice can also assist with SMSF loans to purchase investment properties.