Striving to the do the best for your children is a natural part of raising a family. When the time comes for your adult children to start working, it only makes sense that you’d want the best for their superannuation as well.
Setting up an SMSF for your family can be one of the best financial decisions you can make that benefits not only your superannuation nest egg, but that of generations to come. We discuss the benefits of setting up a family SMSF below.
Why establish a self-managed super fund for your family?
One of the main drawcards for running your own superannuation fund is the ability to have better flexibility, control and decision-making on how your retirement savings are invested. Unlike joining a retail super fund, there are many more obligations and responsibilities involved in setting up self-managed super funds — this hasn’t stopped over 1.1 million Australians who are drawn by the many benefits of being part of an SMSF.
SMSFs are now more accessible to families
As of July 2019, self-managed super funds in Australia can now have up to six members (previously, only four-member funds were allowed). This means that more parents are now able to include their children (and potentially their children’s spouses) in their self-managed super funds as members.
Implementing an investment strategy that benefits generations
Having all of your family’s retirement savings under the same fund means that you can collectively drive the investment strategy that will grow your respective balances during the accumulation phase right through to pension phase.
Education and experience
Aside from the financial benefits of driving your own investment strategy and choosing the SMSF assets that comprise your superannuation investment portfolio, the process of having your child help manage your SMSF provides them with invaluable education and experience.
Younger generations are becoming increasingly interested in financial topics, however, becoming an SMSF member (and potentially an SMSF trustee themselves) provides indispensable knowledge. Not only will they understand the intricacies of superannuation law and investment strategies, but they will also engage in taxation management, insurance, and even estate planning. Exposure to investment markets, and particularly if you choose to invest in direct property within your SMSF, can help develop a level of financial literacy that can set them up for lifelong financial success.
Making contributions for your children is easy
Depending on your circumstances, you may wish to make voluntary contributions for your children to kick-start their superannuation account balance. Having a family super fund makes it easy for parents to make contributions on behalf of their children.
More capital for SMSF property investments
Perhaps it goes without saying that the larger the total balance of the SMSF, the more capital there is to potentially leverage in order to purchase property within the fund. The ability to buy direct property as one of the assets within your superannuation funds is the standout feature when comparing SMSFs to APRA-regulated funds.
By having a superannuation fund with the same family members, the property that you choose to invest in can benefit all fund members, regardless of whether they are growing their balances or converting their balance to income streams.
How to invest in property within a family super fund
The potential benefits of holding a family super fund extend past the financial reward. However, investing in direct residential or commercial property with their SMSF appeals to many self-managed super fund trustees and is a popular strategy. When you set up an SMSF, you undoubtedly want to ensure that you have the best structure for your family’s needs — the same goes for SMSF property investment.
To ensure that you have the best lending structure for your SMSF property investment goals, contact the team at SMSF Loan Experts.
Frequently asked questions about family SMSFs
Should I choose an individual or corporate trustee for my family SMSF?
Your unique set of circumstances will guide whether you choose to have an individual or corporate trustee structure for your family super fund. Remember that if you have child members (who are under the age of 18), they will be ineligible to be an SMSF trustee — so this is an important consideration when choosing to set up an SMSF for your family.
Can my children rent the property we buy in an SMSF?
Unfortunately, one of the rules of SMSF property investment is that you must comply with the sole purpose test, meaning that residential property is not allowed to be rented out to SMSF members, or any parties related to them.