Consider seeking advice to ensure your SMSF complies
There’s so much happening in the superannuation sector at the moment it can be hard for SMSF investors to know when they need advice and which aspects of the fund they can manage themselves.
There’s so much happening in the superannuation sector at the moment it can be hard for self-managed super fund (SMSF) investors to know when they need advice and which aspects of the fund they can manage themselves.
Ian Campbell, AMP Capital SMSF Community member, says whether you need advice depends on how well you understand regulations related to your fund and its investments.
“I'm up on the law and what I'm invested in is fairly limited. If I'm doing anything that's a bit unusual, which I have done on a number of occasions, I run it by my auditor to make sure he's happy I’m compliant,” he explains.
For instance, recently Campbell acquired a property from his super fund, and he sought advice to ensure the transaction met the rules.
“Getting advice reduces the risk of the fund receiving a qualified audit report, which is the last thing you want. Sometimes you need professional advice to confirm your understanding of the law is correct,” he says.
A qualified audit report is one where the auditor has identified the fund has breached super laws.
Despite the raft of new rules coming in this year, Campbell says he is comfortable he does not need to seek advice about his fund.
“I am in pension mode and the $1.6 million transfer balance limit does not apply to me; that's where all the major complications arise. It is business as usual.”
Campbell’s recommendation for SMSF members considering if and when to seek advice is to assess the consequences getting wrong any actions you take with your SMSF. “Seek advice if you're not sure what the ramifications are,” he says
Start out right
It can be a false economy not to get advice when setting up the fund, especially when it comes to the right trustee structure. This is because SMSF members often only understand the need and benefits of a corporate trustee after receiving formal financial advice.
Recently, many SMSF members wishing to control their fund’s set-up costs have gone with online operators and ended up with an individual trustee. This allows for four people to be individual trustees of an SMSF. But it can be short sighted to choose the individual trustee model.
Most advisers suggest using a corporate trustee, essentially a company that controls the SMSF. This is because new fund members can become directors of the company as other members leave, without having to change the name of the trustees on all investments, which is the case if you use individual trustees
This is an advantage because the fund won’t need to have the ownership of every share, managed fund, bank account and property changed should a member die, which is what happens when the SMSF has an individual trustee.
“Get advice to start the fund to avoid problems down the track, especially if the members may want to use the SMSF to buy property. Banks will often only lend to a corporate trustee,” says Liam Shorte, financial planner and SMSF specialist with advice firm Verante.
Getting advice at important life events such as reaching preservation age can also help improve your financial circumstances. Preservation age is the time when consumers can access their super.
“Also seek advice if there's a difference in salaries or ages between spouses because there are strategies that can take advantage of these disparities,” Shorte says.
While Campbell says in his situation there’s no need to seek financial advice, given regulatory changes this year it may be prudent for some SMSF members to seek advice.
This is especially the case for SMSFs with members still in accumulation phase. It might be an idea for people in this situation to seek advice to ensure they are making the most of the more generous provisions in place at the moment.
“It’s not a do-it-yourself year when there are so many changes to the superannuation system. This year I have an 11-page checklist for clients, when usually I can cover off everything they need to know in a conversation and review report,” says Shorte.
“Normally I would talk through salary sacrifice and contribution arrangements for the year, return on investments and other strategies. But this year we're looking at many different things because of the reduction in the contribution caps and pension limits,” he adds.
If you run an SMSF, now’s the time to make sure you are taking advantage of all available concessions this year before some end on 1 July. If you are unsure whether you are, it may be time to seek advice.
But there’s nothing wrong with managing your fund yourself if you’re comfortable you are not in breach of the law.
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