Central Coast Accountants

The state of SMSF in 2016/2017; regulatory changes and the rise of the robo SMSF

Published on January 17, 2017 at 12:00 AM

Self Managed Superannuation Funds, otherwise known as SMSFs, are an increasingly popular way for people to manage their super. Unlike conventional super funds, in a SMSF you have control over the investments and the returns to your retirement savings can be significantly greater - if it’s managed well.

An overview of changes to SMSF in 2016/2017:

As you’d expect, there are regulations for SMSFs and you must ensure the SMSF is compliant. It’s also important to stay on top of the regulatory changes for SMSFs, especially if you plan on setting one up for yourself. With that in mind, below you’ll find a summary of the changes to SMSFs in 2016, heading into 2017.

SMSFs are affected by the Government’s budget reforms around superannuation, which include a $1.6 million limit on retirement balance and a lowering of the annual pre-tax contributions limit to $25,000. These restrictions are more stringent than previous years, making it more difficult for SMSFs to accumulate large pools of savings.

It’s important to note that the Government also wants to make these regulatory changes retrospective, meaning that those who have already accumulated more than $1.6 million will need to adjust their plans accordingly.

Setting up a SMSF fund

So how do you set up a SMSF? It is recommended that you have at least $200,000 in super savings to properly capitalise on the benefits of a SMSF. If you have less than that, then the costs of setting up and administering the super will be too great for what the returns will generate. For those that don’t have $200,000 in savings, it’s possible to set up a SMSF with a group of up to four people, with each contributing to an overall pool of savings. Sometimes a person will set up their super fund with their spouse for this reason.

Once you’ve made the decision to establish a SMSF, there are a number of processes that you’ll need to work through. Registering the SMSF with the ATO, creating a trust deed, appointing trustees, setting up a bank account for the fund, rolling the super into the account and selecting an investment strategy.

If you’re unsure about how to set up the fund by yourself, consider hiring an SMSF expert that can walk you through the process.

Be aware of robo SMSF

Over the past year, there has been a lot of interest in "robo SMSFs". These funds automate the investment and management process by determining where the fund should invest based on algorithms. These algorithms are proprietary and therefore the actual performance of the robo SMSF may vary. Given that most people who set up SMSFs want control of making investments themselves, it would seem counter-intuitive to then hand control over to lines of computer code.

But for people less confident in an investment strategy, a robo SMSF might be a good “middle ground” investment opportunity. It would also be beneficial to speak to a SMSF expert, to discuss your options if the opportunity of robo SMSF intrigues you.

Ready for the next step?

If you are ready for the next step, or would like to discus your options further, we would love to help. Please call (02) 4396 4322 or Email us.