We have witnessed a lot of talk in the media regarding the appropriateness of Self-Managed Superannuation Funds (SMSF), this has been driven largely by the findings by the Royal Commission and Productivity Commission.
Do you need $1 million to start a SMSF
According to the Productivity Commission recommendations, yes. But that would also have you believe the data which was used as part of their findings is consistent across the sectors.
SMSF data, provided by the Australian Tax Office (ATO), included items such as contributions tax and insurance in its net earnings figures, while the Australian Prudential Regulation Authority (APRA) did not.
For there to be a fair comparison across the superannuation sector, then consistent data must be used before providing statements as controversial as this.
Furthermore, a minimum account balance of $1,000,000 would also mean that far more superannuation wealth will be held by retail and industry funds, whose performances in acting in the interest of their members have globally been challenged via the findings throughout the ongoing Royal Commission into the sector.
So why would someone start a SMSF with a lower balance?
The Australian Securities and Investment Commission (ASIC) has kept a stance that an SMSF should have a minimum balance of at least $200,000. From a cost perspective, the costs to obtain advice, implement, establish and maintain the fund on an ongoing basis, would be higher under circumstances where a lower balance exists.
However, fees are not the only factor when considering SMSFs.
Many people may have a contribution plan in place or they may aspire to acquire direct property via their superannuation, they may want to undertake a Limited Recourse Borrowing or hold a commercial property to lease to their business.
There are distinct advantages to good estate planning in SMSF – the main one being that if you plan well, your money is distributed in the way you desired. Your BDBN is a valuable tool, that used correctly will see your SMSF dealt with according to your estate plan and in the way, you’re intended. Your SMSF has been carefully managed by you, and the BDBN is an essential part of that strategy.
As clients realise the control that an SMSF is able to provide over their retirement wealth and the additional asset types and classes they can invest in, these factors are important to consider.
Source: Tag Financial Services