A new year is a great time to review the way your SMSF is running and make any changes to ensure the structure continues to help you achieve your retirement wealth management goals. Here, we explore 5 essential factors to consider.
A new year is a great time to review the way your self-managed super fund (SMSF) is running and make any changes to ensure the structure continues to help you achieve your retirement wealth management goals.
Here, we explore five essential factors to consider when you’re doing your annual SMSF review.
1. Is your SMSF investment strategy still appropriate for your retirement needs?
Trustees have an annual obligation to review the fund’s investment strategy to make sure the outcome it produces will ensure members can meet their lifestyle needs when they leave work for the last time.
“Each year it’s important to check whether the fund’s investment strategy continues to be appropriate for its members given their age and their retirement needs,” says AMP financial planner Mark Borg.
For instance, if the fund’s members are about to move into pension stage, now’s the time to ensure the investment strategy can accommodate this shift.
“The start of the year is also the time to review whether the members’ appetite for risk, the current investment structure and the investment strategy are properly aligned,” he adds.
2. Are the fund’s investments still suitable for its members?
The new year is also the time to check whether the assets and funds held within the SMSF are invested in line with the investment strategy.
“Trustees are responsible for setting out the investment strategy and also ensuring the funds invested in it continue to remain within the parameters set by the investment strategy,” Borg says.
He says prudent trustees regularly assess whether the fund’s assets are held in line with its investment strategy.
“It’s important to ensure the assets held in the fund comply with the rules around what SMSFs can hold and ensure the structure does not hold any restricted assets,” he adds.
Restricted assets include those that benefit the fund’s members or trustees, such as holiday houses, artworks or classic cars. Compliant assets tend to be routine investible assets such as shares, term deposits and exchange-traded or managed funds.
3. Is the fund meeting all its annual requirements?
It’s essential to get the detail of the fund’s administration right, because SMSFs that are found to be non-compliant face restrictions, remedial action and penalties.
So now is the time of year to ensure the fund’s contribution statements, income tax and regulatory returns have been lodged for the previous year. If they have not, or if anything is remiss, work with your advisers to ensure you meet all regulatory requirements the SMSF must address.
“Make sure all the fund’s meetings have been appropriately minuted and the minutes stored properly,” Borg advises.
4. Are your records up to date and accurate?
Alongside ensuring the fund’s regulatory documents have been appropriately filed, it’s essential to make sure that all the records that back up the trustees’ decisions have been organised properly.
“Trustees need to ensure they have kept and filed records of all asset purchases and sales over the previous 12 months. In addition, they must ensure the annual operating statements of the fund’s legal position and copies of annual returns lodged are kept for five years,” Borg notes.
Records of any changes of trustees or directors during the previous year, as well as members’ written consent of any trustee appointments, must be kept for a minimum of 10 years. Penalties often apply if trustees fail to keep records, so make sure yours are accurate and accessible at this time of year.
5. Does an SMSF continue to be appropriate for members’ circumstances?
Given the onerous responsibilities trustees face, on a regular basis it’s an idea to consider whether an SMSF continues to be the most appropriate vehicle for the members in which to hold their retirement funds.
For instance, Borg notes sometimes as members get older it is advisable to consider whether certain changes should be made to the fund, or whether it should be closed down altogether. The right choice will be different for every SMSF.
SMSFs are living investment vehicles with considerable responsibilities – and opportunities. At the start of the year, review the fund’s administration and investment arrangements and future strategy to ensure the vehicle continues to meet the members’ long-term retirement needs.
While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.