An exciting trend that has recently emerged may help fight the gender gap in retirement savings; more and more of Australia’s young women are taking greater financial control over their superannuation by opening a self-managed super fund!
Find out more below about the benefits of SMSF ownership and why more women are investing via self-managed super.
What is the appeal of a self-managed super fund for women?
Retirement doesn’t discriminate based on gender. For both men and women of different age groups, a common financial and life objective is to enjoy a comfortable (if not early) retirement. SMSFs provide greater control and transparency of investments than APRA-regulated superannuation funds such as industry or retail funds.
For women, however, they often retire with significantly less money than men, often because of wage inequality or time out of the workforce raising children. The ability to drive their financial situation and set an investment strategy that allows them to meet their financial objectives now and into their golden years is one reason that many women are drawn to the benefits of SMSF ownership.
What is the average super balance by age?
It can be a tricky game to compare your super balance to others, as everyone’s journey is different. However, the Association of Superannuation Funds of Australia (ASFA) regularly releases resources that may help you understand where you sit against your peers.
Good to remember: In Australia, the age you can start to access your superannuation (your ‘preservation age’) is different from your age pension age.
What’s involved in an SMSF setup?
SMSF establishment is unlike simply signing a form with your employer and having a super fund opened for you. Setting up an SMSF does come with additional steps and responsibilities.
Some of the steps involved in opening your own fund include:
Deciding on your trustee structure
The role of super fund trustee shouldn’t be taken lightly. There are some differences between a corporate trustee structure and having individual trustees. Understanding, interpreting and applying superannuation law is one of the primary responsibilities of SMSF trustees.
In Australia, the primary regulator of SMSFs is the Australian Taxation Office (ATO). SMSF Trustees must keep up to date with the reporting, and administrative obligations set out by the ATO.
Your fund members
The SMSF setup process includes choosing who your fund members will be. SMSFs can have up to six members, however, it’s important to remember that each person’s personal objectives may be different, particularly if they’re of a different age group (such as having parents or adult children as members of the same super fund).
Forming your trust deed
An SMSF trust deed guides the trustee’s decisions, and sets out important information, such as when and how the SMSF can pay benefits to its members in retirement, such as the commencement of income streams. A deed is a legal document, so it will need to be prepared by a legal practitioner.
Register your super fund, get a tax file number and ABN
When registering your SMSF, you’ll need to request a tax file number (TFN) for the fund and an Australian Business Number (ABN). Part of this process also includes registering the fund for GST (if necessary) and electing for your fund to be ATO-regulated. Without electing for your new SMSF to be ATO-regulated, you will miss out on tax concessions.
Opening an SMSF bank account
Multiple fees may apply to setting up and running your own super fund. These fees, as well as dividend payments, or the proceeds of when you sell shares within the fund, all need to be directed through a bank account. In fact, most super funds will have their member contributions, including voluntary contributions and those of a salary sacrifice arrangement, to be directed through the fund’s bank account.
Setting an investment strategy
One of the SMSF trustee’s responsibilities is setting the SMSF investment strategy. The strategy guides how member benefits are to be invested, including the investments allowed under the fund. Review the SMSF investment strategy regularly, such as at the end of each financial year, as many circumstances change in the market and your personal circumstances, such as shifts in income.
Deciding on your investment options
Having greater control and flexibility over investment options is one of many investors’ main drawcards to SMSFs. Deciding on where to invest does take time and knowledge. After all, past performance of an investment option is not always a reliable indication of its future performance. Reading any investment product’s relevant product disclosure statement is a good start. As the trustee of a super fund, you must be confident that your investment portfolio is working to boost your super balance.
The ability to purchase residential or commercial property through your super fund is one of the features of SMSFs that is unavailable through APRA-regulated funds. Including property as one of your SMSF investments may help you reach your retirement goals sooner. It’s important to know that unless your fund has enough money to comfortably afford a property outright, you’ll need to establish a limited recourse borrowing arrangement (LRBA).
Partner with SMSF professionals
The process of SMSF establishment, as well as the ongoing management of running your own super fund, requires time and expertise. Engaging the services of a secure storage solutions, taxation professional, financial adviser and legal practitioner can ensure that you remain compliant with taxation and superannuation laws and give your fund members the best shot at a comfortable retirement.
SMSF loan experts are one of the many SMSF professionals that can assist along the way. Not only can we look at guiding you through the SMSF setup process, we provide ultra-competitive SMSF loan rates and unrivalled property flexibility to underpin a robust SMSF investment portfolio.
Whether you’re one of the many female investors looking to set up an SMSF, or simply a savvy investor wanting to learn more about the benefits of SMSF property investment, contact our specialist team today.