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Can I buy gold with my superannuation?

The short answer is “yes”, there are several ways to use your super to buy gold. Read on to find out how.

It wouldn’t take Sherlock Holmes to conclude that people are worried about the global economy, and its effect on their super.

Between 2001 and 2007 the Australian Stock Exchange was booming, and super was growing with it. The so called “balanced” investment options became decidedly unbalanced, with allocations to shares pushing 80%.

It seemed any fund manager with a pulse could generate large returns on investment. But we all know what happened next. The GFC hit, and the share components of super funds and managed funds plumetted.

I met a retiree who invested $1.4 million in super in 2007. Their expensively-dressed, big-bank-paid adviser said that they would have $2 or $3 million in five to ten years’ time. Needless to say it hasn’t even recovered to its starting point.

Some people are choosing to “ride it out”. You’d be surprised the number of people who are waiting for their super to “make back what it lost”, and then they plan to invest elsewhere. Others feel locked in to their current financial planner because they cannot cash in so-called “frozen funds” which got stuck with bad property and mortgage assets in the GFC.

Others are looking to different options, and if you’re read this far, you’re probably thinking about doing the same.

How do I buy gold with my superannuation?

There are several ways to buy gold, silver or other commodities through your super fund. These include:

  1. Direct investment in physical gold (or silver)
  2. Buying mining shares
  3. Gold and silver ETFs *
  4. Managed funds

* ETF means “exchange traded fund”. An ETF can be bought and sold on the stock exchange. The ETF manager buys the index or commodity in question. So a gold bullion ETF will use its funds to buy gold bullion. The investor buys in by purchasing shares in the ETF on the stock exchange. The process is the same as buying any other listed share.

How NOT to but gold with your super

But before we go on, let me tell you how NOT to buy gold in your super.

Unless you meet a condition of release, such as reaching retirement age (currently 65), or permanent retirement after reaching “preservation age” currently 55-60, you are not allowed to access to your super.

You can move your super between funds. A transfer between super funds is called a “rollover” and most people are able to roll over their money to a fund of their choice.

But to cash in your super without meeting a condition of release is illegal, as is promoting a scheme to give early access to super. Even if you withdraw it to invest the money elsewhere, it’s still illegal.

How to buy gold with your super

Step one: Ask your current fund if they have an investment option that includes gold.

Some ordinary superannuation funds allow members the option of direct investment. Your fund could be one of them. Call your super fund or your financial adviser to see if gold investment is an option.

Many super fund accounts now offer more flexible, member directed investments. Direct investment is not possible, but you can invest in gold mining shares, ETFs or managed funds, particularly if you have a “wrap account” type arrangement.

Step two: move your super to an account that allows investment in super

If you cannot buy gold in your current super fund, you’ll need to switch to one that does. Which fund should you choose? Well it depends on the type of investment you want.

Indirect investments

If you are happy with ETFs, managed funds and mining stocks there are several flexible super fund options that allow you to direct your investments. These usually incur higher fees than a standard fund and you will pay brokerage when buying shares or ETFs.

Direct investment

If you want to buy physical gold or silver with your superanuation, you will need to open a Self Managed Super Fund (SMSF). More and more Australians are choosing to use a SMSF to take control of their super. Self managed funds hold more assets than any other type of super account (industry funds, retail funds, corporate funds).

A self managed super fund is just like any other fund, except that the members of the fund are also the controllers (trustees) of the fund.

There are special rules to prevent fraud and mismanagement, and the extra paperwork is not for everybody. Plus, the government recommends that the members of the fund (maximum 4 people) should have combined super of $200,000. But for those willing to take on the responsibilities, a SMSF is the best vehicle for taking control of your super and retirement.

Buying gold through a SMSF

There are several steps to buying gold through a SMSF.

  1. Establish the super fund, including a trust deed
  2. Transfer (roll over) your money into your new super fund
  3. Establish a written investment strategy (a legal requirement)
  4. Select and purchase investments
  5. Arrange appropriate storage and insurance

There are many technical aspects to investing via a self managed super fund. Beyond Accountancy can advise on the establishment of a super fund, rolling over your existing super, investing in accordance with the superannuation rules and implementing contribution and tax stategies.

We can ensure you pay the right amount of tax now and in retirement, as well as avoiding the hidden death duties that could take thousands out of the super you leave to the next generation.

Our tax and audit services are provided based on an ongoing, fixed monthly fee amount. We charge for the work we do for you, not a percentage of your assets.

To speak to an experienced SMSF accountant or to arrange a consultation call or email our office.

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