Insights on Financial Strategies
Get Your SMSF into Gear
The number of self-managed super funds (SMSF) has grown sharply over the last few years. And its in no small part because SMSF's can borrow to invest these days.
Like any investment theres risk. Is the risk worth it?
CPA Australia describe gearing as a legitimate wealth-creation strategy thats used widely outside superannuation. They see no reason why gearing shouldn't be used inside super, where its part of a property formulated investment strategy. Diversity is key.
The SMSF trustees have the responsibility to make sure what they do comply and that the primary goal of what they do is to provide retirement benefits for the members.
So before taking on a gearing strategy through an SMSF, trustees need to consider the following 6 things;
- Get professional advice, especially surrounding compliance and the trust deed.
- Follow correct procedures on the borrowing and set up. See point 1.
- Know what could go wrong.
- Consider life insurance to cover the loan.
- Understand the costs, which when taking into account charges, fees, stamp duty, etc can be high.
- Compare the alternative of doing the geared investment outside super.
Well, if youre considering gearing an investment such as property in your SMSF, contact Cliftons to make sure you dont fall foul of the regulations and law.