A Self Managed Super Fund (SMSF) is a way of saving for your retirement. They work in a similar way to all other superannuation funds, abiding by the same superannuation and income tax laws. The big difference with a SMSF is that as a member of the fund you are also a Trustee, which means you are responsible for the proper running of the fund.

Why choose a SMSF?

1) Control

The primary reason people set up a SMSF is for greater control, with an influx of new funds being set up after the Global Financial Crisis. A SMSF can allow you greater overall control over areas such as estate planning, contribution strategies, pension payments, borrowing inside super and managing Capital Gains Tax liabilities. It can be an opportunity to put you in the driver’s seat when it comes to maximising your super potential.

2) Choice

Another reason driving the popularity of SMSFs is the desire for wider investment choice. A SMSF can provide a wider range of investment options than other super funds. The options include direct shares, direct property and collectibles (like wine, artwork, automobiles – restrictions apply). Also allowing you the flexibility to buy and sell assets quickly, and take advantage of opportunities.

3) Cost

The costs, as a percentage of total funds under management, can be lower for a SMSF with significant super assets. Generally, funds with super assets in excess of $400,000 may find it more cost effective. Research shows the average SMSF balance is $1.35 million.

Considerations

1) Time

You will need to devote more time to running and maintaining a SMSF, it is crucial that you keep on top of deadlines for meeting your responsibilities and obligations as a Trustee. Having a SMSF is not suited to everyone, it is hard work and time consuming, so it is important to consider whether it will provide an outcome that cannot be achieved from another type of super fund.

2) Skill

Your SMSF must have a clearly articulated investment strategy that covers the topics of liquidity, risk and return, diversification, meeting liabilities and insurance. The obligation sits with you as the Trustee, there are penalties if your SMSF is not run in accordance with the law (include jail time for serious offences).

3) Cost

In the first year there will be up front set up costs to establish a new SMSF. In the following years, there will be ongoing compliance and advice costs for the running of your SMSF. As a rule of thumb, we generally don’t advise setting up a SMSF if your super assets are less than $400,000 due to the impact the fees will have on your balance.

SMSFs are very popular, with the ATO estimating that over 32,484 SMSFs were established from June 2013 to June 2014. Nearly one in ten Australians now run their own super fund. As licensed Financial Advisers, Harvest can take the hassle out of running your SMSF.

We can assist with the

  • initial structure and set up of a new SMSF.
  • design of an investment and insurance strategy.
  • review of your existing investment and insurance strategy.