What am I getting myself into? A guide to Self-Managed Super Funds (SMSF)
Setting up a SMSF can be a great way to take control of your superannuation, but what strings are attached when taking a greater interest in the management of your retirement savings?
So, you want to have control?
Be prepared to take a more active role with your superannuation.
When you establish a SMSF, you become the Trustee (or the Director of the Trustee Company). Your role will be to make appropriate investment decisions for the members, and ensure that the fund is compliant in the eyes of the ATO (Australian Taxation Office).
There’s a reason you pay super funds an administration fee – it’s a highly complex and regulated industry that cannot be taken lightly. However, once you have a plan, a trusted advisor and an end goal, you should find the ride quite enjoyable.
You’ll be legally obligated for the running of the fund
You‘ll find countless websites offering low-cost SMSF establishments, but what you don’t pay up-front may mean hefty fines from the regulators.If a Trustee is found to have failed to meet their administrative and compliance obligations under super and tax law, they could find themselves with financial penalties or disqualification as a Trustee.
Percentage-based fees can be a thing of the past
The SMSF’s main cost can lie in the administration and accounting, which is typically a flat fee. The benefit of a flat fee is that as your balance increases, the fee as a percentage of your balance will continue to drop.
Minimum balances of SMSFs are constantly debated, however, ASIC (Australia Securities and Investments Commission) has provided guidance that it would like to see a minimum starting balance of around $300,000.
You’ll need to pick up the tax bill
You’ll need to lodge an audited tax return with the ATO each year. You won’t pay any additional taxes by running your own SMSF. The first year can feel a little strange paying taxes as non-SMSFs have tax taken care of behind the scenes. A 15% tax on concessional contributions and 15% tax on most income pre-retirement are paid at tax time. The ATO also charges an annual levy of $259.
You might need to put your plans to travel the world on hold
In order to establish and run a SMSF, you need to be an Australian resident. In certain circumstances this can be circumnavigated. However, without professional advice, you run the risk of operating a non-complying fund, which can see the fund incur heavy penalties.
You’ll need to take an interest in insurance
Unlike retail or industry super funds, there’s no “automatic insurance” when you establish a SMSF. Another role as the Trustee is to consider each individual member’s need for insurance and ensure that they apply for and hold this cover within the fund. Whilst it’s not mandatory to have insurance, it’s mandatory to consider it.
Can anyone help me?
Sometimes you need to outsource your administration to the professionals. There are multiple ways that having a trusted advisor can help you run your superannuation in an efficient manner – they have the systems and knowledge to help you make the most of your money. Even if you plan to do the majority of the work yourself, you’ll still require an independent auditor and potentially an accountant and actuary.
Let us help you!
Please feel free to call us on 1300 925 081 to discuss whether a SMSF is right for you. We have extensive experience in setting up and maintaining SMSFs, so you’ll have access to professionals who can provide you with advice that’s focused on your long-term goals.
All contents presented within this document are not to be construed as personal financial advice, taxation advice, a recommendation or an offer or invitation to buy, sell or hold a financial product. It is for general informational purposes only.
While every attempt has been made to ensure the accuracy of this information at the time of compilation, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors or omissions (including responsibility to any person by reason of negligence) is accepted by CXC FP, its officers, employees, agents or authorised representatives.
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