Should You Have Your Own SMSF?
A SMSF is a private superannuation fund that the members manage.
SMSFs operate differently to industry or retail superannuation funds (such as AustralianSuper, Plum Super or HESTA) and below are some key considerations before deciding to set up your own SMSF.
Benefits of Using a SMSF
Investment choice and flexibility – for instance you can invest in direct properties and you can dictate the investment selection process.
You may be able to use gearing to acquire assets in the SMSF (via a limited recourse borrowing arrangement).
SMSFs are subject to the same tax rates as industry or retail superannuation funds, however through a SMSF you can more easily put in place tax strategies that are suitable for your situation.
It may be cost effective to run your own SMSF if the balance is large enough. Conversely, research by the Australian Securities and Investments Commission indicate that on average, SMSFs with balances below $500,000 have lower returns after expenses and tax compared to professionally managed industry and retail superannuation funds.
Risks and Responsibilities of Using a SMSF
SMSF members (who are also trustees or directors of the trustee company of the SMSF), are personally liable for all of the SMSF's decisions (such as formulating and implementing the investment strategy) and for meeting all of the SMSF’s compliance obligations.
Investment returns of your SMSF may underperform professionally managed superannuation funds.
You remain responsible for managing the SMSF even if your circumstances change — for example, if you get sick or become unemployed. Furthermore, complexities may arise if there is a relationship breakdown between members.
If a SMSF loses money through theft or fraud, it will not have access to any government supported compensation schemes.
If there is a dispute amongst members of a SMSF, they cannot access the Australian Financial Complaints Authority (AFCA) to resolve the dispute.
You should consider these points and seek professional advice to determine whether a SMSF is suitable in your circumstances. We are authorised to give personal advice for all superannuation needs, including SMSFs and will be happy to assist.
GENERAL ADVICE WARNING: The above is general advice only and does not take into account your personal circumstances or objectives. You should seek your own independent financial and tax advice to ascertain whether and how the above applies to your particular situation and whether it is likely to meet your objectives, prior to making any financial and investment decisions.