I am thinking about setting up a Self Managed Super Fund.  If I do, can I use my super monies to trade?

As the name implies a self-managed super fund (SMSF) is a type of super fund that the members manage it for their own benefit.  If you have the time as well as the expertise, including advisors that you can call on, to devote to managing your investments then setting up a SMSF may be an option for you to look at your retirement future.

One of the main benefits of having a SMSF is having the freedom of investment choice in allowing you to decide how and where to invest your superannuation monies. They are growing in popularity as members’ balances rise and they become more knowledgeable about managing their retirement savings with over 27,000 new SMSFs established last year.  And it is that attractiveness of being able to invest super monies in particular assets means that similar growth is expected to continue for some time yet. 

However SMSFs cannot operate trading entities so effectively any share activities need to be done as an investor rather than as a trader. You can purchase (and sell) exchange traded options as part of a hedging strategy but any premiums paid (or received) are to be show as CGT events.

Whilst you have the ability to invest your super monies in shares, options & Contracts for Difference (CFDs), it must be in accordance with your written investment strategy for the fund and also in compliance with the SIS Act that regulates SMSFs. 

Be particularly careful with any investment in CFDs.  If you deposit funds with a CFD provider as security for the fund’s obligations to pay margins, you would contravene the SIS Act.  This is because you are effectively providing a charge over fund assets.

This article first appeared in the Sept/Oct 2011 issue of YTE Magazine www.YTEmagazine.com. Copyright Your Media Edge Pty Ltd 2011.