Is a Self-Managed Super Fund Right for You?

A self-managed super fund (SMSF) can give you more control over your superannuation, making it a great way to help you reach specific retirement planning goals. However, before you make a decision about a self-managed super fund, it’s important to look at the possible risks and rewards. Let’s take an in-depth look at the pros and cons of establishing and maintaining a SMSF.

Should I Create a Self-Managed Super Fund?

This is an important question to ask yourself, and it’s a good idea to discuss it with an adviser because the process can be complicated. For example, when you first set up your SMSF, you need to decide on fund members and trustees, establish the trust and the trust deed, set up a dedicated bank account, register with the ATO and create your investment strategy.

Whilst this can all seem a bit overwhelming, there are SMSF professionals that can assist you in navigating your way through these complexities.

Self-Managed Super Fund Pros and Cons

Pros

Control: An SMSF can give you more control over your investments than you might otherwise have through other superannuation accounts. If direct control is one of your key drivers, an SMSF may be for you.

Tax Management: With the flexibility of an SMSF, you may be able to optimise your tax outcome. For example, through the direct ownership of listed shares you’re able to ensure that if assets are sold you’ve done all you can to maximise capital gains tax relief. 

Investment Risk Management: As mentioned previously, an SMSF can give you more control over your investments. For directly held shares as an example, to mitigate risk you could put a stop loss in place to ensure that any losses from falling share prices are limited.

Cons

Running Costs: Because SMSFs require the services of auditors and trustees, they can be more expensive than other Superannuation funds. It’s important to ensure you utilise the flexibility and functionality of your SMSF to justify the costs.

Responsibility: It’s important to understand that if you establish an SMSF you will be the trustee of the fund. As a result, this role comes with responsibilities and obligations that you need to comprehend.

Penalties for Non-Compliance: Your SMSF reporting includes lodging SMSF annual returns. These annual returns are more than simple income tax returns. They include super regulatory information, member contributions, and payment for the SMSF supervisory levy. If you fail to comply with these requirements, you could be subject to penalties. If you have a good relationship with your adviser, they should be helping you navigate your way through it.

Retirement Planning Guide

To learn more about self-managed super funds, as well as other strategies to plan for retirement, download our free 32-page Retirement Planning Guide.