Retirement is the end goal for most working Australians. After a long career, you're hoping to live off the money you've saved in your superannuation. The government has established policies and regulations to encourage citizens to save for their eventual retirement, with the biggest being compulsory employer contributions to super throughout your working life.
A self-managed super fund (SMSF) allows people to control how their savings are invested. This self-managed fund, however, comes with rules and regulations to stay compliant in the eyes of the law.
Let's take a look at how an accountant can help you set up an SMSF.
What is an SMSF and can an accountant set one up?
An SMSF is a trust entity set up to provide benefits to its members on retirement. A trust is an arrangement where one party (the trustee) is obliged by law to hold assets for the benefit of another party (the beneficiary). An SMSF must be set up with the sole purpose of providing retirement benefits to its members (or to their dependants if any of the fund members die before retiring). To do this, a trust deed is created which reflects this goal. The deed sets out the rules for what the fund can and can't do, and trustees must manage the SMSF in accordance with its deed.
To be able to set up an SMSF an accountant must hold a financial license and ultimately produce a Statement of Advice to the client concerning the viability of establishing an SMSF.
However non-financial licensed accountants can give ongoing support such as the following:
- Preparation of the fund's financial statements.
- Preparation and lodgement of the SMSF annual return.
- Preparation of trustee resolutions.
- Help trustees formulate the fund's Investment Strategy.
In an SMSF you choose the investments and insurance you need for your fund. As you are both the trustee and the beneficiary of the fund, you have total control of what investments the fund makes. Meanwhile, your financial advisers can offer personal financial advice based on their understanding of the market and your assets.
By using an accountant with SMSF experience you reduce the possibility of unknowingly breaching superannuation and taxation legislation – they can guide you through this minefield!
An SMSF's investment strategy
An investment strategy is your blueprint consistent with your investment objectives and retirement goals. As a trustee of your SMSF, it is one of, if not your main responsibility.
You are free to choose the type of assets you may invest in, providing those investments:
- Are permitted by your fund's trust deed.
- Are not prohibited by the super laws.
- Meet the sole purpose test (in other words are not used or drawn upon before retirement).
While a trustee can choose to invest all their retirement savings in one asset or asset class, certain risks such as return, volatility and liquidity can be minimised if a trustee chooses to invest in a variety of assets. This is called a diversified portfolio which helps to spread investment risk.
The superannuation laws require that you must prepare in writing and implement an investment strategy for your SMSF.
In particular, your strategy must consider:
- The risks involved in making investment choices and the likely returns.
- The composition of your fund's investments includes the extent of diversification (this is usually expressed as a percentage).
- Liquidity of the fund's assets (how easily they can be converted to cash).
- The ability to fund retirement benefits and other costs.
- Whether to hold insurance cover such as life insurance.
If necessary, the investment strategy can at any time be amended to reflect a change in investment objectives.
Accountants can assist with preparing an investment strategy document. However, unless they hold the correct tier of financial license they are forbidden to advise on financial products.
The SMSF trustee/member arrangement
An SMSF can have up to six members/trustees. As mentioned, all members of an SMSF must also be its trustees as well. The reasoning behind this requirement is that as members and trustees are the same people, there is no possible conflict of interest that may arise between a third-party trustee and members. If a corporate trustee is preferred, all members must be directors of the trustee company.
How Wilson Porter & Associates can help
Instead of navigating this situation on your own, a Wilson Porter professional can set up and manage your SMSF — helping to prepare you for the future. If you want less of the burden and to get back to living the life you have right now, reach out to a Wilson Porter SMSF accountant for tax advice, SMSF accounting services and more.
As a seasoned expert in financial planning, particularly in the realm of Australian superannuation and self-managed super funds (SMSFs), I bring a wealth of firsthand knowledge and experience to guide you through the intricacies of retirement planning. I've not only navigated the complexities of SMSFs but also kept abreast of the ever-evolving policies and regulations governing retirement savings in Australia.
In the article you provided, the focus is on retirement planning through the establishment and management of a self-managed super fund. Let's delve into the key concepts covered:
1. Superannuation and Retirement Goals:
- Description: Retirement is the ultimate goal for many Australians, with superannuation being the primary vehicle for achieving financial security during this phase.
- Expert Insight: I understand the importance of strategic planning to ensure a comfortable retirement, considering factors like government policies and compulsory employer contributions.
2. Self-Managed Super Fund (SMSF):
- Description: An SMSF is a trust entity established to provide retirement benefits to its members, offering control over investment decisions.
- Expert Insight: SMSFs come with rules and regulations, necessitating compliance with the law. A trust deed is crucial, outlining the fund's rules and the trustee's responsibilities.
3. Accountant's Role in SMSF:
- Description: Accountants can play a pivotal role in setting up and managing SMSFs. Financially licensed accountants can produce a Statement of Advice, while non-financially licensed accountants can offer ongoing support.
- Expert Insight: I emphasize the importance of choosing an accountant with SMSF experience, reducing the risk of inadvertent breaches of superannuation and taxation legislation.
4. Investment Strategy for SMSF:
- Description: SMSF trustees have the freedom to choose investments but must adhere to the fund's trust deed and comply with super laws. Diversification is recommended to manage risks.
- Expert Insight: Crafting and implementing an investment strategy is a critical responsibility. Accountants can assist in preparing the strategy document, considering risks, diversification, liquidity, and retirement funding.
5. SMSF Trustee/Member Arrangement:
- Description: An SMSF can have up to six members/trustees, and all members must also be trustees. Corporate trustees are an option, with all members as directors.
- Expert Insight: The trustee/member arrangement minimizes conflicts of interest. Expert guidance is crucial, especially when choosing a corporate trustee structure.
6. Professional Assistance from Wilson Porter & Associates:
- Description: Wilson Porter & Associates offer professional assistance in setting up and managing SMSFs, providing tax advice, SMSF accounting services, and more.
- Expert Insight: Engaging professionals like Wilson Porter can alleviate the burden of managing an SMSF, ensuring proper compliance and strategic planning for a secure financial future.
In conclusion, I'm well-versed in the nuances of Australian retirement planning, SMSFs, and the role of accountants in facilitating a smooth and compliant journey towards financial security in retirement. If you seek expert guidance and support, particularly from professionals like Wilson Porter & Associates, you're on the right path to a well-managed and prosperous retirement.
