One of the great attractions to self-managed super funds (SMSF) is the investment choice that is available to SMSF trustees in providing for their own retirement.
A self managed super fund allows trustees to invest in shares in a listed company, whether within Australia or overseas, buy residential or commercial property, including using borrowings, more conservative assets such as holding term deposits and even more exotic investments such as artwork, wine and other collectibles.
SMSF Investments – Where do you begin?
To some extent, the choice of SMSF investments are limitless; however you need to ensure that the super fund’s investments are for the sole purpose of being for your retirement, and NOT to be deriving a current day benefit. In addition, all investments need to be made and maintained on an arms-length basis.
Self Managed Super Funds and Property
A key attraction for business operators is the ability to acquire property within a self-managed super fund in which to operate their business from. This purchase could be acquired outright using cash, acquired through an ungeared unit trust or through borrowings using what is known as a limited recourse borrowing arrangement.
Importantly, by using a self managed super fund, you can acquire a property and pay an arms-length rent amount from your business and claim a tax deduction towards funding your own retirement.
Other SMSF Investments Strategies
Self managed super funds can also acquire certain assets from a member. These exceptions within superannuation law allow for a member who holds listed shares, managed funds and commercial property to be able to either acquire these assets or gift the value of these assets as a contribution to the slef managed super fund.
It is important to note that any transfer of ownership, whether completed as a purchase or contribution will trigger capital gains tax and potentially stamp duty. You should consult tax professionals to further understand the implications and strategies available when transferring assets into a self managed super fund.
You may also invest up to 5% of the total assets of your fund in an in-house asset. An in-house asset is a loan to, or an investment in a related party of your self managed super fund, or an investment if a related trust of your fund.
You can’t lend money or provide any direct or indirect financial help from your fund to you or a relative of you.
It is important that any investment purchased within the fund is consistent with the fund’s investment strategy. A requirement of superannuation law is the need for an SMSF to prepare an investment strategy, having regard to risk, liquidity, diversification and the ability to discharge assets as and when they fall due.
Also, it is critically important that the SMSF assets are held separately from other personal and business assets. You also need to ensure that your fund’s ownership of assets is secure, showing all of the fund trustees or corporate trustee.
Need more information on SMSF Investment Strategies?
Further information on SMSF Investment Strategies and other trustee education articles, booklets, webinars and videos are available free for SMSF Academy Members – read more about SMSF Academy Trustee Membership Benefits here.
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