Life Begins At.....
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FINANCIAL MATTERS Does your SMSF fi t with your retirement? Self-managed super funds (SMSFs) have always been particularly attractive to the very affl uent, to professionals wanting their fund to own business premises, or to people who just want to exercise control over where their long- term savings are invested. With approximately 800,000 SMSFs in operation in Australia today, it’s fair to say that the majority act in accordance with their obligations and serve the needs of the users well. The very wealthy may always want to manage their super. They will probably have the expertise and engagement to do so, or have very trusted professionals to whom they can outsource this responsibility. For some retirees however, the relevance of the SMSF structure is being questioned with the realisation that management of this type of fund requires more time, expense, expertise and concentration than their busy lifestyle permits. Two of the reasons commonly quoted for starting a SMSF are cost and investment choice. Controlling cost is challenging, as the burden of compliance with superannuation legislation increases. Other ongoing costs may also be higher than expected. On the other hand, mergers and competitive pressures within industry super funds mean that many have extensive investment choice offerings and may now be the cheaper option. Fees within industry and some low-cost retail funds may actually have fallen in real terms. The trade-off for self-control over your retirement funds can be an increased fi nancial burden in terms of professional management and compliance. The lower cost differential as motivation for using the SMSF may have vanished in many cases. The Australian Taxation Offi ce (ATO) is charged with checking that the SMSF is structured correctly and complies with superannuation legislation. All of the four possible members of the SMSF share equal responsibility under the law. This is in spite of the fact that a dominant member may take charge of strict duties. The duties involve documenting, reviewing and updating the investment and risk management strategies, trustee meetings and minutes, compliance checks and reviews of annual audit and tax returns. Certain duties by their very nature must be outsourced to professionals such as valuers and independent auditors. Informed trustees know only too well that the ultimate responsibility for the operation and compliance of the SMSF rests with them and as such cannot be outsourced. Uninformed trustees may be subject to enforcement activity by the ATO. The buck stops with every trustee on an equal basis whether they are actively involved in the administration and decision- making of the SMSF, or not. In extreme cases, the ATO can enforce huge penalty fi nes for non-compliance. A lack of involvement in the administration and decision-making is usually not a defence, even if it is caused by the death or disability of the main SMSF administrator. SMSFs offer diverse investment choices. If the trustees invest only in managed funds or cash, or the investment management is outsourced, then investment choice differs little from that offered by industry or retail funds. Even direct share investments are now available Zilla Lyons is a regional manager at the Australian Catholic Superannuation & Retirement Fund. She has worked at the fund for eight years and specialises in member education and engagement. Call ACSRF on 1300 658 776 or visit www. catholicsuper.com.au for more information on superannuation and retirement. in some industry funds. If, on the other hand, the SMSF members wish to invest in direct property, art or collectables, then these choices will not be offered by the other funds and an SMSF may be the only choice. The argument in favour of the SMSF may be even more compelling if investments outperform. Sometimes however, ongoing SMSF maintenance becomes a chore with very little outperformance. The comfort that once attached to administering the SMSF disappears. If the health of the trustee anointed with the administrative tasks is threatened or fails, unnecessary stress may be placed on the remaining trustees. If you are an SMSF trustee who has become unmotivated to spend vast chunks of time on paperwork and investments, then do a careful cost benefi t analysis of the marketplace offerings. Look at the assets you have invested. If your fund assets are now worth less than $250,000, check that you are getting good returns for the costs. You may indeed fi nd that a variety of reputable industry or low-cost retail funds could manage your money more effectively and certainly less stressfully. THE RETIREE WINTER 123