SMSF and the next Gen

Recent data suggests that younger Australians are increasingly taking control of their superannuation savings by opting for self-managed super funds (SMSFs). According to the Self-managed Super Fund Quarterly Report for September 2022 by the Australian Tax Office, more than one in ten members of an SMSF are aged under 45 years.

Additionally, industry data from the Australian Investment Exchange (AUSIEX) shows that Millennials and Gen Y Australians are the fastest-growing segment of people becoming new SMSF account holders. AUSIEX records indicate that investors born between 1981 and 1996 accounted for 10% of all SMSFs established across its network since 2020. This number is twice the number of Millennials setting up SMSFs between 2016 and 2019 and five times more than pre-2013 levels. Furthermore, the number of SMSFs established by Generation Z investors also doubled in the past 12 months, according to AUSIEX records.

The increasing interest in SMSFs among young Australians is due to the advent of compulsory superannuation. With a significant nest egg to manage beyond their property assets, younger Australians are opting for SMSFs to have more control over their superannuation savings. SMSFs allow investors to choose bespoke life insurance policies to be held within their funds, and they can decide what sort of investments they want to make with their superannuation. Additionally, the growing number of online trading platforms that directly market their services to younger Australians has opened the door to trading superannuation savings directly in shares both in Australia and overseas, exchange-traded funds, and directly investing in cryptocurrency.

However, setting up an SMSF comes with significant responsibilities and costs. While self-managed funds can be established with a relatively small amount of money, they can cost up to $4,000 or more to establish and a further $4,000 or more each year to ensure that all accounts, tax returns, and other annual compliance documents are filed. It is only cost-effective for investors who hold $200,000 or more in superannuation savings.

Moreover, running an SMSF can be extremely time-consuming, especially for those super fund owners who choose to research and make their own investment decisions. It is important to appoint appropriate advisers to undertake key responsibilities, such as providing taxation and audit advice, as failure to comply with these laws ultimately becomes the responsibility of the owner of the fund. Failing to comply with these requirements can result in costly penalties.

While taking an interest in your financial position is always a good thing, setting up an SMSF can be a big step involving taking on considerable responsibilities. It is essential to seek advice from a professional adviser skilled in providing advice to self-managed super funds to ensure that doing so is the right step for you.

Why not take the next step and talk to a qualified SMSF financial planner? 

LifeTime Financial Group are specialist (holding appropriate accreditations) advisors who are ideally positioned to assist Next Gen clients considering self-managed super. There are a range of cost effective solutions available in the market place that significantly reduce the costs of compliance.

If you would like to discuss your current Superannuation position or wider financial planning needs, why not call us today on 03 9596-7733? There is no cost or obligation for our initial conversation/meeting.

Alternatively, please make an appointment using our online Book an appointment (Blue button above)

LifeTime Financial Group. A leading privately-owned Melbourne-based Financial Planning practice with no ties to any financial institution.


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