CART is a term that I coined to help you, as a DIY super trustee, grasp the less glamorous aspects of running your own fund, namely:
✔ Creating a compliance culture: Get it right from the start. The superannuation rules create enormous opportunities without the need to put your retirement savings at risk by breaking those rules. I explain how you can set up a DIY super fund the right way in the chapters in Part II of this book, while in Chapter 11, I take you through the main areas of super compliance, including what I call the ATO’s seven deadly sins of DIY super.
✔ Getting active on administration: The biggest decision you need to make in terms of administration is whether you do it yourself or you delegate this task (but not the responsibility) to a professional administrator. In Chapter 10, I take you through what you need to consider when making such a decision, as well as what tasks are involved when administering a DIY super fund.
✔ Rigorous reporting reaps rewards: Are you punctual and particular with details? You need to possess both these traits as a DIY super trustee. Alternatively, you can appoint a service provider who can perform the reporting role for you. In Chapter 12, I explain the accounting records you need to keep, and what returns and forms you must lodge with the ATO. I also explain the important role performed by your fund’s auditor.
✔ Entering a tax-friendly world: Without doubt, the headline in super is ‘tax-free super for over-60s’, but that benefit isn’t the only good news on the tax front. I explain tax-friendly super contributions in Chapter 4, investing and super tax in Chapter 18, and super’s tax goodies in Chapter 13.
If you set up your fund properly (see Part II) and if you steer your CART in the right direction (see Part III), you can really enjoy your DIY super fund. You can then focus your attention on your fund’s investments (see Part IV).
It’s Your Super Money – Invest Wisely
Although investing your super monies can be very exciting and empowering, you must remember that you’re investing on behalf of someone else – yourself! Confused? Fully understandable, because, in a DIY super fund, you’re both the DIY super (SMSF) trustee and a SMSF member. In effect, you’re wearing two hats, which means you must be very careful to separate your responsibilities as trustee, from your entitlements as a fund member.
As trustee, you must set your fund’s investment strategy, and choose investments subject to special investment rules (see Chapter 15). In Chapter 14, I explain the importance of understanding risk and return when investing against the backdrop of the relatively recent Global Financial Crisis. I also explain the restrictions on borrowing money to invest (Chapter 16), and the rules applicable to property investing (Chapter 17).
Your Retirement Super Star
If you’re aged 60 or over and retired (or satisfy another condition of release on or after the age of 60 – see Chapter 19), you can access tax-free superannuation benefits from your DIY super fund. If you choose to retire before the age of 60, you may pay some tax on your super benefits. If you’re aged 65 or over, you don’t even have to retire to access your tax-free super benefits.
The Retirement Super Star in Figure 1-1, essentially a summary of Part V of this book, is a great starting point for kicking off your SMSF retirement plans. You also find the answers to the second, and third, most popular questions in retirement planning:
✔ What if I don’t have enough super to last for my expected lifetime (see Chapters 19, 20, 21 and 22)?
✔ What happens to my super savings, and my super fund, after I die (see Chapter 24)?
I know what’s on your mind: If these are the second, and third, most popular questions, what then is the number one question asked by Australians when planning for one’s retirement?
That’s easy. The most popular question asked by prospective retirees is: ‘How much money is enough?’ I consider the answer at length in Chapter 3, and cover the topic in even more detail on my website, SuperGuide (www.superguide.com.au).
Figure 1-1: Your retirement super star.
Chapter 2
Understanding How Super Works
In This Chapter
▶ Taking four super facts seriously
▶ Knowing what makes a super fund tick
▶ Considering all of your super options
▶ Sizing up your current super fund, and your super entitlements
▶ Figuring out the fees your super fund charges
▶ Deciding whether to change super funds
U nless you own a goose that lays golden eggs, you need to create your own nest egg for your retirement. Like most Australians, you probably hope you’re going to have a good-sized egg, because you want your later years to be free from financial worries.
Your challenge, as a future retiree, is to create the most comfortable retirement that you can afford. The dilemma, however, when thinking about saving for retirement is whether to rely on the Age Pension, or to accumulate superannuation or private savings, or a combination of all of them. For the record, the Age Pension is around $427 a week – paid fortnightly – for a single person, or $644 a week as a couple (as at September 2014, applicable until March 2015, and increased in March and September each year).
In this chapter, I give you four reasons why your only true option is to take superannuation seriously, and explain why living solely on the Age Pension is no longer a lifestyle option. I take you through the key decisions that help you grow your super balance and list the important information you need to know about your super benefits. By reading this chapter, you find out what super fund options are available (including a self-managed super fund), and whether you’re in a position to change super funds. I also supply you with lots of interesting statistics that you can quote at dinner parties or use when pontificating at the pub.