Superannuation Planning

Knowing the possibilities and limitations of your Superannuation Fund will allow you to get the most out of it.

A Superannuation Fund (or pension) is an Australian retirement program that requires employers to pay their employees an additional percentage based on the proportion of their salary and wages. Super Funds have become one of the biggest assets that you will have in your lifetime. Because they are such an important asset, it’s essential to make sure you know the options available to you.

Superannuation Funds can hold a broad range of common investment assets including property, shares, cash and fixed interest. Most Super Funds allow you to choose an investment strategy for your account from a range of investment options.

Each investment option has a different return and level of risk, to suit a variety of investors and economic climates.
Many people assume that their superannuation is all inclusive in their Will, but this is not the case.

Superannuation is managed in a trust structure. For employer schemes this is usually a large institution and for self managed Super Funds, it could be a person or a private company. Super benefits are normally paid out when you retire or reach the required age specified by the fund. They may also be paid out if you were to become disabled, terminally ill or pass away.

When a member of the fund passes away, the trustee of the Super Fund has discretion to pay out the Super entitlements as they see fit. The trustee does not have to follow the wishes set down in the deceased member’s Will, if they think that all of the deceased member’s dependants have not been adequately taken care of.

Self Managed Superannuation has become attractive to many people, families and business operators, due to the flexibility and opportunity to manage your own investments. Unfortunately for the uneducated, this option can be filled with risk. If you run, or wish to run, a Self Managed Superannuation Fund, you will need to know all the regulations surrounding tax laws and the passing of assets to whom you have nominated. The following, real-life example demonstrates what can happen if you don’t acquire the legal advice of a specialist in this field.

A mother and father set up a self managed Super Fund for their retirement. They have two adult children with whom they have a good relationship. The plan is for both the children to evenly inherit the fund after the mother and father are gone. The mother passes away and the father then appoints his daughter as the new co-trustee. The fund continues to grow and allows the father to live well in his retirement. Both the brother and sister are still the ultimate recipients of the Super Fund.

The problem, once the father passes away, is that another “co-trustee” needs to be appointed. The daughter decides to appoint her husband as the co-trustee. As the mother and father have both passed away, the law requires the fund to be paid out. Unfortunately for the brother, the trustees have “sole discretion” of where the funds are allocated. The daughter and her husband allocate the entire Super Fund to the daughter and the brother receives nothing.

Because of greed and a lack of thorough Superannuation Planning, this kind of scenario is occurring all too often in Australian families. To prevent a similar situation happening to your family, seek the legal advice of a specialist who knows all the angles of Superannuation Planning and management. Although Super Funds can provide great flexibility and investment opportunities, careful planning and the correct documentation will ensure the financial security of your retirement and your family’s future.

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