One of the most attractive features of investing in a Self-Managed Super Fund (SMSF) structure is the ability for a family to pool their wealth together into a single entity and invest. An SMSF structure also provides you with access to a wide range of investment strategies, which are otherwise not accessible via a public offer fund, such as a retail super or industry fund.
So, what does this mean in practical terms? Well, there are a whole range of SMSF investment strategies available to people looking to build their nest egg.
Below, we have included some of the investments we’ve helped our clients to facilitate.
Investing in Property Through an SMSF
Property is a popular investment asset in Australia. SMSFs can invest in residential and commercial property. There are various options for purchasing property via an SMSF structure, such as an outright purchase, tenants in common, via a unit trust or via borrowing. As a member of an SMSF, you can lease commercial property owned in the SMSF to your own business; however, you cannot lease or stay in a residential property that your SMSF owns.
For tips on structuring your property purchase via a SMSF, check out the recording of our session on Buying Property Through an SMSF.
Investing in Private Equity Through an SMSF
Your SMSF can purchase shares in privately owned businesses. Privately owned businesses generally present more risk than listed businesses (e.g. companies on the Australian Stock Exchange) but also tend to have the ability to generate a strong return.
What we need to be careful of is whether you (or a related party of the SMSF) own more than 50% of the business or have any control over the business.
Investing in Cryptocurrency Through an SMSF
We’ve seen a lot of interest from our clients in relation to investing in cryptocurrency through their SMSF. It’s an area that has seen remarkable increases in value over the past few years (and even in the past few months!).
Proof of ownership and record keeping are fundamental concepts in SMSF compliance with the ATO, whereas cryptocurrency is pseudonymous by design, which makes it a tricky investment to own in an SMSF structure - but not impossible.
Investing in Artwork and Classic Cars Through an SMSF
Your SMSF can also own artwork or classic cars, which may make good sense as an investment if you have an eye for collectibles.
Remember, though, that whatever assets you buy through your SMSF are not allowed to be used by you or a related party. For example, if you’ve bought a classic car, you can’t take it out for a cruise and can’t store it at your family home. So, make sure to consider whether you’re intending to make a lifestyle purchase or implement an investment strategy, first and foremost.
What’s the Right Investment Strategy for Your SMSF?
SMSFs are a great, flexible structure in which you have control to own the assets you choose but, at the end of the day, it's superannuation money. Its ‘sole purpose’ is to provide for you when you retire from the workforce and it’s important to ensure the various investment strategies deployed are ultimately aligned to build and grow your retirement nest egg.
This means due consideration must be given to the strategy and direction for the SMSF, taking into account the respective individual requirements, investment objectives, diversification, liquidity and cashflow. As an example, an SMSF with a member who’s 35 and still growing their wealth will have a very different investment strategy to another who’s looking to retire and needs to make a plan around drawing from their accumulated wealth in the SMSF.
You should always get advice as there are strict rules around what you can and cannot do when it comes to SMSFs, with significant penalties if you get it wrong. To help you navigate superannuation law and the various SMSF investment strategies that you can leverage, reach out to our Melbourne-based Private Wealth and SMSF teams.
You might also like to register for our FREE upcoming Investment Seminar, which will address a series of updates regarding wealth creation and the market.