What to consider when thinking about a Self Managed Super Fund (SMSF)

21 January 2020

Counting money - BUSSQ Super


People generally opt for self-managed superannuation if they want to have more control over their investment assets and costs. It is quite common that people would have a SMSF because their accountant recommended it.

What do Self Managed Super Funds look like?

  • An SMSF will have a maximum of four
  • The Trust Deed is the book of rules for that fund
  • Each SMSF member is also a trustee of the fund
  • No member of the SMSF fund is an employee of another member, unless they are related
  • The Self Managed Super Fund is registered with and regulated by the Australian Tax Office,
  • You develop and maintain your own investment strategy and choose insurance

Important things to consider about SMSFs

A Self Managed Super Fund can cost you more than an industry or retail super fund. Some members consider a SMSF to cut running costs – however, in many cases it can cost you more to self-manage your superannuation, depending on how much you have in your super fund.

You need to know superannuation

You need a good knowledge of the superannuation system to make sure you meet your compliance obligations. The ATO regulates this to ensure all trustees are compliant and penalties can apply.

You need to be experienced at making investment decisions

You need to be experienced in making investment decisions, as you’ll want to get the best return for yourself and the members of the SMSF. Doing proper research can be quite complex as there’s a lot of information out there.

A SMSF is still bound by the rules of superannuation investing

Many people think having a SMSF allows them to access their super and do what they want with it, such as buy a holiday house or a boat that they can use, but this is not the case. The money in the Self Managed Super Fund needs to be held in trust on behalf of the members and used for the sole purpose of providing retirement and death benefits.

There are a lot of obligations as you are the Trustee

It is a requirement by law that a super fund trustee must responsibly manage the super fund solely for the benefit of its’ members. Doing it properly is a difficult job and involves a lot of time and sometimes cost. If you’ve never done that sort of thing before, or if paperwork, forms and legislation are not your strength, then managing your own may not be for you.

Lack of protection

Industry super funds like BUSSQ are regulated by APRA (Australian Prudential Regulation Authority) which means you have access to special compensation schemes to protect you. You don’t have the same protection with a Self Managed Super Fund which puts you at a higher risk from fraudulent and unscrupulous activity.

How much does it cost to run a SMSF?

Many think that running their own SMSF costs practically nothing. But this is far from the case.

My accountant said I should have a Self Managed Super Fund, so I reckon it's a good idea.

In some cases, managing your own super with a SMSF may be perfect for you. However in many cases we have found that the fund is not used to its’ fullest advantage and is often lacking in a number of areas. More often than not, if your accountant has suggested you start up a SMSF they have also suggested that they would happily provide administration and audit services too. This can be a great source of revenue - for them.

Should I opt for a self managed super fund?

At the end of the day, the decision on whether or not to manage your own super is an individual one based on your personal circumstances and needs. It can be very costly if you get it wrong, so do your research first.

If you’re looking for advice before starting an SMSF, Skylight Financial Solutions can help you. Skylight was built by BUSSQ to provide affordable financial solutions, on a wide range of topics. Whether you’re after a second opinion before starting an SMSF, or need assistance winding up a current one. Skylight can help. Call us on 1800 692 877, or book an obligation free appointment today.

It is most common for a couple to establish a Self Managed Super Fund together, and bring their superannuation assets from other super funds (retail super funds, industry super funds etc) into the SMSF to allow them to self-manage their superannuation assets.

In all cases, funds in the superannuation system are tied up until the member meets a condition of release. This applies equally to public offer funds and SMSFs.

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