Herald Sun "Take control of nest egg"

ANTHONY Keane examines the basics of starting a self-managed super fund.

The fastest-growing slice of our retirement savings sector also can be the most dangerous for people who don't play by the rules.

Self-managed superannuation funds have enjoyed spectacular growth over the past decade, yet tough penalties enforced by the Australian Taxation Office can wipe out half your nest egg if you deliberately flout the SMSF laws.

Hewison Private Wealth director Chris Morcom says Aussies love DIY. "We like to think we're all experts the renovation statistics show that," he says.

But beware of penalties

Before starting an SMSF, it is crucial to seek independent advice and to understand the harsh penalties that apply if you get it wrong. "The main penalty that scares everyone, and should scare everyone, is the risk of losing half your super if you are running as a self-managed fund and are deemed to be non-compliant," Morcom says.

The ATO can treat your fund balance as income and apply a penalty tax at the top marginal tax rate. "If you have $1 million you can lose $470,000 of it," Morcom says. "That's why people running a self-managed fund need to make sure their fund is complying with the rules." These rules include not using your SMSF assets for personal use. If it's a property you can't live in it, if it's a painting you can't hang it on your wall and if it's an antique car you can't drive it.

You cannot withdraw money from your SMSF to pay personal debts or other loans. It's locked away, just like traditional super.

Read full article here

This article also appeared in Herald Sun, Daily Telegraph, The Mercury, Townsville Bulletin, Cairns Post, Adelaide Advertiser, www.news.com.au Online and page 29 in the Herald Sun Money section