Clime Private Wealth Monthly Update

With the pending election, much focus has been on the potential loss of franking credits. However, as a trustee, you should also have a continual focus on other, more fundamental, issues in running your own Self-Managed Super Fund.

While the topic of trustee responsibilities can be dry, it is critical that you, as trustee of your fund, address each matter as it relates to your circumstances.

The Trustee

I have met many SMSF operators who have individual trustees rather than a Corporate Trustee. This is typically initially a cost-saving measure on establishment, perhaps saving $1000 in set up costs, with a view to ‘sorting it out later’. This is flawed logic. The time of ‘sorting it out’ is often forced by the death of your spouse. An SMSF with individual Trustees must have at least 2 members, therefore the death of your spouse forces you, as the remaining individual Trustee, to be making important decisions regarding the structure of your SMSF at a time of grief. The stress of the situation may lead you to make an ill-considered decision that has an immediate impact on the running of the fund and potentially an estate dispute in the future. This can be mitigated by reviewing the structure of your SMSF now to ensure it is compliant and meets your needs both now and on the loss of a spouse either via death or incapacitation.

The Trust Deed

Many Trust Deeds were established at commencement of the fund in a ‘tick-the-box’ fashion. For many of you, the bulk of your assets are sitting in your SMSF, and in all likelihood you have established a Will, but does the Trust Deed of your SMSF allow the wishes detailed in the Will to be executed? You would be surprised at the number of Wills that are established without the Trust Deed of the SMSF being revisited. Additionally, you need to consider any legislative changes that have been made since the establishment of the Trust Deed and revisit it accordingly. The Deed needs to work for your estate and in the case of incapacitation.

Non Concessional Contributions (NCC)

As my colleague Fanoula Stathatos articulated in a video last month, now is the time to address your non-concessional contributions. This may be as part of a broader estate planning structure, or simply moving as many assets as possible into a concessionally taxed environment. Your age, current super balance and contribution history are key determinants of what you can and cannot contribute. As a general rule, when you are younger it is easier to contribute funds and difficult to withdraw, while this reverses later in life.

As contribution limits have changed in recent years, it is valuable to have a timeline of your planned contributions to ensure the funds are available at the appropriate time. This timeline needs to be revisited prior to execution on every occasion to ensure it remains in line with current legislation.

Investment Strategy

On establishing your SMSF, you would have completed an Investment Strategy, which is an obligation on all Trustees on establishment. The auditor refers to the investment strategy to ensure the funds are invested in line with this strategy. Whilst the compliance obligation is important, there is a practical value in you as a Trustee devoting time to consider what you want to achieve from your fund.

All of the above requires dedicating time to firstly identifying any potential issues and then determining the appropriate course of action, which may require input from multiple professionals. This starts with a conversation. All Clime Private Wealth Advisers are skilled at guiding you on this conversation.

If you would like to learn more about managing your SMSF or how we can assist you to achieve security in your retirement, please contact us on 1300 788 568.

The information provided on this webpage and the rest of is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein. Please consider our Information Memorandum, Product Disclosure Statement and Financial Services Guide before investing in one of our products. Past performance is no guarantee of future returns.
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