Developing your SMSF investment options: strategy comes first

MSI - SMSF2By Anne Rollason, MSI Ragg Weir, Accountants, Melbourne Imagine that you have just arrived at the amusement park and need to go on a ride – which will it be? There are lots of choices, and they have different degrees of merit. Perhaps some seem safer than others?  Perhaps some seem scarier like the whip, or some require less effort like the canal boats, or some, like the roller coaster are up and down? Maybe given your age, the merry-go-round is adventurous as you wish to get? There are so many choices and decisions to be made.  It is not dissimilar when considering the investment options and strategic planning for your Self-Managed Superannuation Fund (SMSF). Okay, the amusement park may be more fun, but the ride is quickly finished. Correct strategic planning in your SMSF can have considerably long term benefits. You can maximise the value of your SMSF both in your lifetime, and after your death. These are all legally available in industry or retail funds, but are sometimes harder to implement in such a large scale environment. Strategic options you can consider include:

  • Negatively gear an investment property in your SMSF, or simply borrow to buy a property in your SMSF
  • Start a Transition to Retirement Pension
  • Use superannuation funds to buy premises for your business
  • Use of auto reversionary pensions to secure pension income for a beneficiary after your death
  • Use of reserves to allow the payment of an anti-detriment amount
  • Introducing your children to the SMSF
  • Using the CGT Retirement exemption to your best advantage
  • Accessing lump sum amounts from your fund
  • Loaning money to your SMSF to invest
  • Use of Binding Death Benefit Nominations to ‘lock in’ who should benefit from your superannuation monies after your death

To return to my amusement park analogy – you may not want to go on every ride, and you (usually) can’t take all these strategic options in your SMSF. It is a matter of weighing up the choices, deciding which factors are most important to your circumstances.  The strategy that is most appropriate to a particular SMSF can depend on:

  • The age and risk profile of the members
  • The ability of the members to make additional contributions
  • Their family situation (e.g. a disabled child, or children of differing ages and needs from different marriages)
  • Assets held outside superannuation.

Clearly, the choice of strategy for your SMSF is a more important decision than the choice of which amusement ride to take. It is a complex and constantly changing area and we strongly encourage you to seek specialised, personal advice.

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