Is a self-managed super fund the right move for you?

Today, more and more people are looking to self-managed superannuation funds (SMSFs) to maximise their hard-earned dollars. 

A SMSF is a private super fund where its members are also trustees, meaning they have control over how their retirement savings are invested. SMSFs offer more investment options, tax benefits and the ability to pool resources to scale returns. It can bring your retirement planning to the forefront of your financial decisions, so you are more focused on your future now, rather than leaving it until it’s too late. 

However, the upside isn’t a given and they’re not suitable for all personal circumstances and lifestyles. Setting up a SMSF is a big decision that comes with ongoing responsibilities, which can be costly and time-consuming. Consider the challenges of a SMSF before deciding whether it’s the right move for you. 

You’ll be audited. 

Each year, your SMSF is required to be audited. It’s your responsibility to prepare financial statements and tax returns annually, and ensure it complies with all relevant legislation and regulations. And these laws change constantly. 

Depending on the severity, penalties for breaching compliance obligations can range from fines or levies to civil or criminal proceedings. If you don’t have the bandwidth to fulfil these obligations or the means to ensure they are, there can be significant consequences. 

Lack of a professional strategy. 

Along with compliance, you’ll also be responsible for the operation and investment performance of the fund. This can be a lot of time and work. 

Sound knowledge of fundamental investment principles is usually the bare minimum if choosing to invest yourself. Retail funds employ fund managers to invest for them. As professionals in this field, they hold a great deal of financial and investment expertise with which to make decisions. If you are to contend with this, you’d better be dedicated to researching and staying on top of industry news and regulatory changes. 

You can outsource the administration, management and investment strategy of your SMSF to a professional, but it will cost you. You may choose to appoint an accountant to prepare your SMSF’s financial statements, perform the audit, ensure compliance and lodge returns. You may also choose to appoint a financial advisor for advice on investment decisions and executing trades. 

If opting to run your own fund, you should ensure your investment choices match your short and long-term goals, attitudes to risk and cashflow needs. You will need an appropriate purpose and strategy for your SMSF, as well as enough time to manage it. 

Poorly structured. 

Many well-oiled SMSFs run into problems when members want or need to exit. If someone dies or gets divorced, things can get pretty messy, pretty quickly with an improperly structured SMSF. 

You’ll need to make a lot of decisions, such as whether you’ll have individual trustees or a corporate trustee, whether your children and/or parents should join, what happens in cases of dispute, etc. But most importantly, make these decisions upfront. If you’re considering starting your own SMSF, create an exit strategy when setting up (and preferably with professional guidance) to help you to reduce the difficult and costly pain of removing a member later on. 

Considering a SMSF for your future? 

If you’d like to know whether a SMSF is right for your future, consider making an appointment with our team. Ascent Accounting will consider your personal circumstances and priorities to determine whether you could benefit from a SMSF. We can help set up and structure your SMSF, and keep it operating smoothly. Contact us today to get started.