Introduction: What is an SMSF and How Does it Actually Work?
SMSFs are commonly known as Self-Managed Super Funds. They are a form of a superannuation fund for individuals with lower incomes, who have traditionally not been able to afford traditional superannuation. SMSFs enable many people to save for retirement without incurring the high fees that come with most other types of retirement plans.
An SMSF can be established by anyone who is eligible for super and has an Australian Tax File Number (ATF) which is not attached to another fund or account. The trustee of the SMSF must be a person, other than the member, and they will control all deposits and investments into the fund. These kinds of funds are different from regular superannuation because they are private and self-managed. An SMSF can also be set up by a person who is not a member of a superannuation fund, though the administration of the fund is usually done by someone who has more knowledge about the field.
How an SMSF Can Maximize Your Savings & Investment
The following are the top 5 ways an SMSF can maximize your savings and investment:
- Paying off your mortgage early
- Subsequently, investing in shares or property that allow for capital growth
- Converting your home into an investment property for rental income purposes
- Picking up a second job (side hustle) to cover additional costs like childcare, insurance, and groceries
- Using the money from your investments to supplement living expenses so you can retire early
How to Choose the Right Accountants for Your Accountant-SMSF Relationship
Choosing the right accountant for your SMSF is a challenging task. You need to find someone who has experience in dealing with SMSFs and is willing to work with you to provide advice and assistance.
There are many ways of finding an accountant but most importantly, you should talk to your friends and family members first. They may know of someone they trust that might be interested in your accountancy-SMSF relationship.
If you’re looking for an accountant, go through the following steps:
- Find a reliable online search engine that allows users to search by location, professional type or company size
- Upload your business profile
- Search the database for all local accountants who have experience with SMSFs or are listed as trusted advisers in the database
The accountant-SMSF relationship is a long-term one that can take years to settle in. Hiring an accountant that operates from the same financial firm as your SMSF is one way to ensure a more stable and effortless relationship with the accountant’s team.
Tips on Opening a New Super Fund and Setting up a Trustee Agreement with Your Bank for Protection
Super funds are a great way for people to invest their money over the long term. They are managed by a fund manager and you pay an annual fee to the company that manages the fund.
However, setting up a super fund is not easy and requires a lot of planning. It is important that you take these steps so that your super account stays safe:
- Prepare an outline of what assets you want to place in the trust (stocks, bonds, properties).
- Consider how much risk you are willing to take before investing in a particular super fund.
- Make sure that your trustee agreement with your bank is drafted properly and protect yourself from any losses if something goes wrong.
- Make sure that you keep accurate records of all your investments and transactions.
- Consider using an SMSF firm like SMSFInFocus, which can help you with the complicated accounting process of setting up a trustee agreement.