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Self-Managed Super Funds

It's about you taking control of your finances.

The staggering statistic that most Australians will retire with less than $200,000 in their superannuation fund,  a sad indictment on over 20 years of compulsory superannuation contributions for Australian workers. These amounts will generate less that $10,000 per annum in income at current interest rate levels. There are over 16 million superannuation funds in Australia, with accounts for multiple super funds per person.  Remember, the total population of the country is over 25 million.

The majority of superannuation funds are managed in default funds and this “one-size-fits-all” investment approach. In Australia, most people have money in superannuation funds – however that money is nearly all invested in what has been shown to be highly volatile stock markets and bonds. In recent years superannuation fund members have watched on with dismay as their superannuation fund balances have shown high volatility as those investments have changed in value.

Many retirement dreams have now become nightmares. In the main, managed super funds are either invested in either retail funds or industry funds.  The only real point of differentiation is that industry funds, with a one-size-fits-all investment philosophy, charge lower fees to members as they don’t pay commissions. That’s it, with no reference to the fact that members’ funds are allocated to investment markets that are very volatile in nature over the past five years.

No reference to the fact that their solution to the problem of your investment losses is to carry on doing more of the same and investing as they have done in the past. The focus of their respective advertising campaigns has been to attack each other, while they both continue to generate returns for investors with high risk volatility.


So what's the better option?

A self-managed superannuation fund enables you to take greater control of your retirement savings. That position, combined with professional advice, will enable you to get control of the planning process and provide for your future.

Property & Borrowings in an SMSF

You can now buy direct property within your superannuation fund. The biggest advantage that having a self-managed super fund (SMSF) offers, is the opportunity to invest in property. Property in super funds has not been an option until relatively recently.  New legislation was introduced in 2007 that permitted borrowings to occur within self-managed super funds to invest in direct property. A circuit breaker in this spiral is for you to take more control of how your retirement funds are invested.

If you don’t have to have sufficient funds in your superfund to buy a property outright it is now possible for your SMSF to borrow funds for a property investment if structured in accordance with the ATO’s requirements. You should talk to Lime, about the right way to structure your SMSF before you do anything else.

By taking control yourself and with appropriate advice you can maximise your potential retirement benefits.

  • The loan arranged by your self-managed superannuation fund must be a Limited Recourse Borrowing Arrangement (‘LRBA”).  Under this type of loan the recourse available to a lender is limited to the asset and any rights of that asset (in the case of a property, the rent from that property).

  • The borrowed funds must be used to acquire a Single Acquirable Asset.  This can be defined as a single object of property; for example, an apartment, free-standing residential apartment or a vacant block of land or completed home.

  • The asset must be held in a specially designed trust commonly referred to as a Bare Trust or a Property Trust.

  • The SMSF must have the right to acquire the legal ownership of the asset from the property trust upon repayment of the outstanding loan.

  • The SMSF cannot purchase a property from a related party unless it is a Real Business Property acquired at market value.

  • The borrowed money can be used to carry out repairs and maintenance; however the loan must not be used to make improvements to the asset.


The Advantages of a SMSF

For many investors SMSFs offer four major advantages: 
1.  More control over your investments.
2.  Greater investment flexibility and choice.
3.  Generally lower fees than industry and retail funds.
4.  On average, better performance than industry and retail funds.

More control and greater flexibility over investments 
SMSF members can choose where their retirement savings are invested, with options including listed shares, bonds, listed investment companies (LICs), exchange traded funds (ETFs) and direct property. This flexibility in investment options allows SMSF members to actively manage their investments. With a hands-on investment approach, SMSF members can quickly adjust their portfolios as markets change.

Lower fees and better performance 
A Commonwealth Government report titled: A Statistical Summary of Self-Managed Superannuation Funds (Dec 2009), based on ATO and APRA data, found SMSF members generally pay lower fees and that, on average, SMSF investments performed better than all other super funds over 2006, 2007 and 2008.

How an SMSF could benefit you 
Depending on your individual situation, the advantages of an SMSF may include:

  • tailored tax management on investment income and capital gains

  • greater flexibility in investment choices and asset selection

  • control over your total investment portfolio, with the ability to take account of the risk profile of all your assets, including those held outside superannuation

  • the ability to pool your resources with up to 4 fund members with similar financial objectives, such as family members

  • maximum flexibility in establishing and managing pensions, including account-based, the transition to retirement, and term allocated pensions

  • greater flexibility for accessing Centrelink benefits such as the age pension

  • the ability to invest in direct property

  • the ability to transfer personally owned listed shares, business real property, and managed funds directly into your superannuation fund, and

  • the ability to own business real property in your superannuation fund, to assist your business cash-flow.

Lime Property Solutions, works closely with many firms and can provide you with detailed advice and a deliverable strategy that will enable you to take control of your superannuation fund and put you in a controlling position regarding your financial arrangements.

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