A lot about the complications and hurdles of managing a self-managed superannuation fund (SMSF) has been talked about in the press, and it is really hard to ignore. It is indeed true that the regulations and the income tax environment under which SMSF operate can turn out to be intricate.
As of 30TH June 2016, as many as 8219 SMSFs were found lacking in some aspect of superannuation law and had were reported to ATO for possible actions against them. These make 1.6% of the total number of SMSFs in the country.
Hence we bring to you 5 strategies that would help you manage your investment better in 2017:
1. Acknowledge your responsibility as the trustee of the SMSF
Let us start off with the most basic point. Although you are just an administrator, do not outsource your trustee responsibilities. The major responsibilities include ensuring that the trust deed is current and reflects the present superannuation law and having an up to date strategy.
2. Setting Investment Objectives
You should be confident that your SMSF will become the very foundation of all the needs of your retirement. First you should set the objectives like:
– What is your age and age of other trustees?
– Are you earning or are you in pension phase?
– How many years are left for retirement?
– How much income will you require?
– How much investment are you and other members ready to invest?
– Relevance of taxation of investments and investment income
– To what extent do you think the SMSF will contribute to the needs of your retirement?
– How much risk are you willing to take?
As such, there are many ways of defining the investment objectives. Some examples include:
– SMSF will overcome inflation by 5%p.a.
– SMSF will target a fund value of $ X in 5 years
3. Define weightage to the assets
You need to allocate your money differently in different asset classes, which is how you should invest your funds. Your investment strategy should clearly state which type of fund you want invest in be it share, fixed asset, cash and if they are multiple, assign weightages to them according to the risk and return you have in mind.
4. Go through any other specific rules left:
After you are done with your allocation, the final step would be to go through any rules and restrictions that you feel you should invest in your funds.
5. Final Step
Finally you should consider if your investment strategy is documented properly or not. If your SMSF predominantly involves investing into a single asset we strongly recommend that the trustees keep the all the records intact. The trustees should always follow SIS Acts and Regulations.