IS A SELF MANAGED SUPERANNUATION FUNDS (SMSF) RIGHT FOR YOU?

Self Managed Superannuation Funds (SMSF) are the largest and fastest growing superannuation sector in Australia. Between 2010 and 2014, the growth in the sector is about 29% and according to the ATO quarterly statistical report, there are more than 534,000 SMSFs operating with total assets of $557 billion as at 30 June 2014. As you can see, the SMSF sector is inevitably leading the way in retirement incomes.  But are SMSFs for you?

If managed successfully, SMSFs can certainly offer a great vehicle for building wealth and a nest egg for retirement. Some may have personal reasons for deciding to set up an SMSF while others may simply want to be in command of their own financial future. Regardless of the motive behind setting up an SMSF you should always at least ask the following questions before deciding if it’s “right” for you:

 Do I have enough money?

To run an SMSF you’ll incur one-off setup costs, along with the ongoing cost of investing, accounting and auditing. These costs could easily add up to more than what you would be currently paying with a public offer fund, which is usually about 1% of your balance. The costs mean you may have less money for your retirement, therefore as a rule of thumb, $200,000 collectively between all members is generally the bare minimum in order to make an SMSF cost effective.

 Do I have knowledge or skills?

To successfully run an SMSF, you must possess reasonable financial literacy skills and a sound understanding of the investments you are planning on making in the fund.  You must also keep up to date with tax and superannuation laws.

 Do I have time?

Administering your own SMSF can be time consuming due to the fact that the laws regulating the SMSF sector are complex and onerous. For example, every year a fund trustee must collate super and tax related records in order to meet the ATO reporting requirement and auditing obligations. A fund trustee must review and update regularly the Fund’s insurance and investment strategy.

At Optima Partners and Southern Cross Financial, we have a specialised SMSF team who can guide you in determining if a self managed superannuation fund is the right choice for you. If an SMSF isn’t the right choice we can direct you to other superannuation solutions.

June Tan

Snr SMSF Accountant – OPTIMA PARTNERS