Tips for self-managed super
PLUMBERS, plasterers, soldiers and self-managed super funds...which of these things is not like the others?
Unfortunately, if you're the ATO and this is your 2012 hit list, they're all equal targets.
We know what plumbers, plasterers and soldiers do, but let's take a moment to explore self-managed super funds and why the ATO is interested in them.
Given that the ATO is interested, why would you have one? Typical responses may include:
1. You have control of your own destiny
As you make your own decisions about the assets held by your super fund, you control what your super fund invests in.
2. Your operating costs are lower
Nobody likes paying fees to their super fund, but depending on the size of your fund, a self-managed fund is often a cheaper option.
Of course, the ATO are playing to the number one fear of taxpayers with self-managed superannuation funds - that being a fear of somehow falling foul of the complex rules and frequent changes surrounding self-managed super funds.
For the vast majority of self-managed super funds, these fears are totally groundless. The complex rules are designed for taxpayers who are intent on 'pushing the envelope' as to how they operate their superannuation fund.
My experience has been that most trustees of self managed super funds are happy to maintain investments in the more traditional asset classes, and have no problems staying well within the ATO's boundaries.
With this in mind, things to avoid would be:
1. Investing in bizarre assets
The purpose of a self managed super fund is to provide for your retirement. It is easy to forget that this is real money, even though you can't spend it right now. The temptation is to gamble with investments that may be too risky. Losing money in your super fund is still losing money.
2. Trying to access your superannuation money before you are entitled to it.
As trustee of a self-managed super fund, you control the check book, and therefore you can withdraw money from the fund very simply. This is asking for trouble, as far as the ATO is concerned. Leaving your investments in your self-managed super fund until you are legally entitled to them is always the best strategy.
For many people this is difficult to avoid, but the government (in its wisdom) has decreed that in most cases, you can only contribute $25,000 per year in tax-deductible contributions. Of course, this couldn't be simple and there are a few exceptions, but if no exceptions apply to you and you're caught (which you will be), you will pay additional tax on those contributions.
In all honesty, being on the ATO hit list is not that bad if you are at least trying to do the right thing. Whether you're a plumber or a trustee of a self-managed super fund (or even both), doing the right thing is not that hard if you have the right advice.