News Detail
Jump on the Band Wagon
Thursday, 31 July 2008 11:18
In recent years, the Federal Government has encouraged the Australian population to take a more active role in the management of their superannuation and savings for retirement.
Last year changes in superannuation legislation provided tax advantages to transfer assets into superannuation funds, make additional contibutions into funds in a transition to retirement period, and make pension payments from funds. Members are also now allowed fee choice of which fund they use.
As a result of these changes more people taking an interest in their superannuation and, as a byproduct, there has been an increased demand for self managed superannuation funds (SMSF’s). This has especially been the case with the baby-boomer generation, who will be approaching retirement over the next one to ten years, and who may now switch from their employer-sponsored fund to their own fund and position themselves for a tax-free retirement pension.
At the end of last calendar year Australia’s total superannuation assets were almost 1.2 trillion dollars, up 15 per cent on the previous year, with:
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32 per cent of these funds in retail funds,
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18 per cent in industry funds,
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15 per cent in public-sector funds,
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6 per cent in corporate funds and
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26 per cent in self managed super funds.
Recent statistics from the Tax Office showed that there are now 378,650 self managed super funds, significantly up from 1999 when there were 190,000 funds. With almost 800,000 people operating their own fund, SMSF’s are now the second largest category of superannuation, behind retail superannuation, and with estimated assets of $286 billion this represents an average of approx. $750,000 per fund; although the ATO estimates that approximately 30 per cent of SMSFs have less than $200,000 in assets.
The main reasons sited for setting up a SMSF’s are:
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Control: investor’s desire to exercise more control over their superannuation assets,
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Poor performance: from existing (retail) superannuation funds,
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Recommendations: usually from suggestions by Accountant’s and Financial Planners. Due to the perceived advanatges, the desire for indivividuals to take control of their investments and accumulate savings for retirement, along with the low cost and ease of setting up a SMSF, the popularity of SMSF’s are expected to rise significantly over the next few years.
Research by the ATO indicates, though, that a large number of trustees lack knowledge of their responsibilities and obligations to maintain the compliance of their fund or do not fully understand what they are allowed to do, with:
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30 per cent of new trustees unable to provide an explanation of the sole-purpose test,
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15 per cent didn’t have an investment strategy,
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66 per cent of new trustees could not specify the limit on the level of in-house assets within the SMSF.
Espreon’s Strategist SMSF Deed includes educational notes and rules to assist trustees understand their deed, accompanied by a full set of compliance documents which sets out all standard documents required in operating a SMSF.
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