The financial journey of a doctor is unique and complex. DPM Financial Services is a specialist medical financial advice firm that aims to educate doctors of Australia to make the right financial decisions and achieve their financial goals.
DPM Financial Services is all about you getting the right advice that suits your personal and professional needs and making sure you have confidence in your financial future.
Today I’d like to welcome to the PodMD studio Matt Perrett from DPM.
Matt is a Certified Financial Planner who began his career at DPM in 1999. He has in-depth knowledge of the lifecycle of a medical professional, providing advice and managing investments for clients at all career stages.
*We do hope you enjoy this podcast but please remember that the information discussed here is of a general nature and is not intended to serve as advice. The views and opinions expressed in this podcast are those of DPM, not PodMD. This information has been provided by Doquile Perrett Meade Financial Services Ltd Financial Services License (AFSL) 239690 and is general in nature so it may not be right for your personal circumstances
DPM Financial Services recommends you obtain advice concerning specific matters before making a decision.
Matt, thanks for talking with us on PodMD today.
Thank you for having me.
The topic of today’s discussion is Self Managed Super Funds and when you might consider one. What are some of the reasons you might consider setting up a SMSF?
Generally, I think there are two main reasons why people will consider a SMSF. Firstly, if they want to purchase direct property as this is the only superannuation option that allows for a specific property to be purchased and secondly if they want to have a lot more control over the investments within their superannuation, especially in the direct share space and in more recent times cyptocurrency investment.
More specifically for the medical profession when clients are in or entering into private practice and looking at purchasing rooms this is a common time where this option is considered. As they can ultimately end up renting the rooms from their own SMSF.
There are other reasons as well, including potential estate planning opportunities and bringing children or other family members into the fund and as a couple having one pool of assets to invest rather than two but I would say property and access and control to other assets are primarily the main drivers.
Are there disadvantages to having a SMSF?
I suppose it depends on your definition of a disadvantage. However I would say you take on the Trustee responsibility when establishing a SMSF, which to be fair not everyone enjoys. There is also the establishment cost of a SMSF when compared to other superannuation options, as you incur legal fees and if setting up a corporate trustee, which majority of people do, other ASIC costs as well.
Generally a SMSF is not considered until there is a sizeable amount in super, which I would say is approx. $500k, as the costs are incurred for what and how you are invested in and not how much you have. So, for a lower balance the percentage cost can be high.
It is also very important that while setting up a SMSF may be the most suitable option, if you roll over your existing balance from your old fund and close it down – then you may lose insurance benefits of the old fund, which you would ideally want to keep. Therefore, it is crucial you assess the need for this insurance before completely closing down your existing account.
When is a good time to set up a SMSF?
Short answer is when it is appropriate and serves a purpose. So there is no set answer to this question.
Many people I meet for the first time believe a SMSF is the only way to invest directly into shares. This is not the case as there are superannuation options now available where you do not have to take on the trustee responsibility but still have access to this investment option.
Naturally when an adviser is initially providing advice to clients this option would be discussed, considered and decided upon. But it also should be continued to be considered as your circumstances change or your goals and objectives alter. For example I have had clients for years who worked in public hospitals but then move into private practice, and so may become appropriate, or clients with little knowledge or interest in shares but over time begin to become more comfortable and engaged and so the option is continually considered.
What are some of the obligations that come with having a SMSF?
By creating a SMSF, you are also taking on the role of Trustee which comes with obligations.
Depending on how you establish a SMSF it may also impact on your obligations for example whether you set it up as individual trustees or as a company trustee of which you are directors of the company -will have differing requirements.
In simple terms, you will be responsible for running, operating and investing in the fund. This includes keeping records of accounts, lodging tax returns, preparing annual investment strategies, having the fund audited, etc.
Yes it is possible to outsource some or all of these requirements but to the strict letter of the law even if you do, ultimately you (as the Trustee) are still responsible and the ATO are quite vigilant in their assessment of SMSFs.
How does someone go about setting up a SMSF?
First speak to professionals, accountants and financial advisers to make sure it is appropriate for your goal.
You then need to establish who is a part of the SMSF and whether it will be set up with individual Trustees (of which there must be at least 2) or a corporate trustee (company).
Once this is decided the legal paperwork needs to be lodged for the creation of the Trust (smsf).
I believe before commencing the SMSF you also need to determine how you will manage and meet the legal requirements and obligations of the fund. Are you going to retain all the record keeping, make investment decisions, prepare documentation and investment strategies yourself or outsource this to someone else.
It is then a matter of setting up a bank account in the SMSF and whatever investment accounts you want, and finally either rolling over the proceeds from your existing super or making a contribution into the new fund.
Thank you for your time here today in the PodMD studio. To sum up for us, could you please identify the three key take home messages from today’s podcast on Self Managed Super Funds and when you might consider one.
1. SMSF are just a form or superannuation, so make sure it is appropriate for you and your goals. Discuss all superannuation options with a professional so you enter into this structure knowing it suits you and what to expect
2. Determine how you are going to operate, manage and meet the compliance obligations of the fund, including investment management, tax returns, audits, etc.
3. Finally Governments seemingly love to tinker with the rules of superannuation so in my opinion it is beneficial for everyone to form a relationship with a specialist to make sure they are abreast of all rules and regulations and can assist you in the future.
Thanks again for your time and the insight’s you’ve provided.