So maybe you’ve heard your friends or colleagues talking about managing their own Superannuation, and you like the sound of it. After all, it’s your money, right? The more autonomy you have the better – surely?
DIY Super can be a great choice, but it’s not something to be taken lightly. Like any major financial decision, there are bound to be factors at play you may not have considered. Here’s my starter-pack for self-managed super, including some of the more common mistakes you should steer clear of.
Don't mingle funds
If your business pays into the super fund, this can be seen as over-contributing in the event of an audit, while at the same time, if you use funds from super for individual investments, it could be seen as an unauthorised withdrawal. Performing either of these actions can earn you pretty harsh regulatory penalties, so it’s better to keep your individual and business funds separate from your super.
Keep an eye on your investments
You should keep individual accounts for each type of investment – this way, expenses can come out of the most relevant account. On top of this, interest, rent or dividend income can go into the relevant account so that it won’t be qualified as another type of income.
By checking in on each investment at least once a month, you’ll be more in touch with their performance.
Holding too many in-house assets
In house assets are assets involving loans, investments or lease arrangements with a related party. If more than 5% of your fund’s total assets are in house, you run the risk of being non-compliant. There are some exceptions to this rule, such as business properties leased to a related party, but if in doubt, there’s no harm in getting an expert’s advice before you commit to an investment.
Don't draw on super for other needs
One of the most common compliance errors made by DIY Super funds. Making loans to members or using super funds to pay for business or personal expenses can mean you’ll face strict penalties.
An easy way to avoid this is to change your mindset – if you commit money to your super, be prepared not to touch it for the long run. Your Super can only be accessed in the event of financial difficulty or illness, and even then it can be tricky. Again, if in doubt, reach out for advice.
Being caught short
As Australia’s population ages, we risk the unsettling possibility of living longer than we bargained for when planning our Super. To ensure this doesn’t happen to you, it’s important to maximise your yearly contribution caps. This can be done through salary sacrifice or extra after tax contributions.
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