Destiny In Your Hands

Sydney Morning Herald

Thursday March 27, 2008

By Yvette Nielsen

Self-managed super funds are growing more popular as the process becomes simpler.

Self-managed super funds are multiplying rapidly as more Australians seize control of their retirement. Advantages of so-called DIY funds include control of investment decisions, the flexibility to pay and adjust your own pension, tax benefits, choice of life insurance, and savings in fees and charges.

Justin Sadler, national sales and marketing manager for self-managed fund specialist Super Concepts, says recent legislative changes have provided more choice in super, and the process of setting up a fund is relatively simple.

The first step is to buy a trust deed (which costs as little as $100) and set up a fund. The next step is to appoint trustees and members, create an investment strategy, and invest the assets in line with the rules. Keep accurate accounts and, at the end of the financial year, complete an audit and tax return for submission to the tax office.

"It doesn't need to be difficult, and there are organisations that can make it easier for people to set up a fund, but the first thing is to look at trustee roles and responsibilities," Sadler says.

Almost anyone can run a self-managed fund - whether they are an employee, self-employed, director of a company, about to receive a retirement or redundancy package, already retired with money in a rollover fund, or retired and receiving a pension from a super plan.

You are ineligible if you are insolvent, convicted of a dishonest act or disqualified by the regulator. "If you're not really up on investments, then a self-managed super fund is probably not right for you - you definitely need some knowledge because you're controlling the assets that are going to provide you with an income stream in retirement," Sadler says.

He says most self-managed super fund investors want to create their own investment portfolios but seek help with set-up, administration and year-end compliance.

Super Concepts was named inaugural SMSF Administrator of the Year in 2007 by leading Australian financial services information company Rainmaker.

"It's not too much more different or difficult from running your own business effectively but you need some significant assets - $200,000 plus - to make it worthwhile," Sadler says.

Manoj Abichandani, a partner at Universal Consultancy Services' DIY Super Funds, says 80 per cent of people set up self-managed funds to gain control of what to buy, when to buy and when to sell.

"People don't trust others to manage their money," he says.

Legislative changes by the previous federal government allowed people to invest $1 million in their super before June 30 last year, boosting the popularity of self-managed funds with their lower management fees.

Abichandani and Sadler agree that self-funded super funds are not for all. "Not everyone is suited to running their own fund," Abichandani says. "Suitability is about issues such as whether you like paperwork on weekends, and have financial acumen."

He advises potential investors to get legal advice and seek help from self-managed fund specialists - not general practice accountants. However, he does not agree that you need as much as $200,000 to start.

"It's about returns - it's not the figure that's important, it's what you're going to

do with the money."

HOW TO AVOID THE TRAPS

* Know the law - respect and comply with the rules and regulations of super and tax legislation.

* Do your homework - complete and submit regular accounts and audits on time.

* Understand diversified investments - and how to choose wisely for the long?term. * Make sure you allow time to administer your fund and maintain records.

* Beware low fund balances, which can lead to higher managed costs needing to be offset by higher performances or contributions later.

Useful resource

See the Australian Taxation Office's superannuation pages at www.ato.gov.au

/super/.

© 2008 Sydney Morning Herald

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