Investors ask: SMSF research
Q. I am thinking about setting up an SMSF. What sort of research do I need to undertake before setting up the structure and buying?
A. Your first question should be whether there are any restrictions on rolling over your existing industry or retail funds into an SMSF. If there are no proposed restrictions, then your next consideration would be whether there are significant disadvantages in rolling over your existing fund to an SMSF.
Once, and if, the above are resolved, then your research should include matters such as the appropriate corporate structure, requirements from the Superannuation Act, as well as the income tax legislation of day-today administrative requirements, financing requirements and options, asset protection, insurance needs, retirement planning, succession and estate planning and your overall investment strategy.
Consider the above and then consider taking expert advice before you finalise your decision. There are many strict regulations with SMSFs.
The Australian Securities and Investments Commission (ASIC) recently raised significant concerns about whether property investors are establishing their SMSFs without considering all of the above.
There are ramifications for making mistakes when establishing an SMSF, as well as during the administration process.
However, if the SMSF and leverage strategy is undertaken in an appropriate manner, the benefits are significant – control of an asset base where you have understanding and passion, the arguable benefit of leveraging, the concessional taxation treatment and asset protection, as well as the general benefits of property investment.
Munzurul Khan, principal, Keshab Chartered Accountant