Is a self managed super fund (SMSF) right for you?

A self managed super fund (SMSF) can be a great way to manage your retirement savings, but while there are many benefits to establishing an SMSF, there are also a number of considerations to be aware of. 

10 key considerations for SMSF trustees

1. Be prepared to take an active interest in your super

People wanting to operate an SMSF must be looking for a greater level of control to optimise their retirement wealth. They must also be confident in making appropriate investment decisions in the best interests of their fund. As a trustee, you need to invest time managing your SMSF. While this does not mean doing it all alone, you will be the person in control of its operation.

2. You will have legal and administrative responsibilities for your SMSF

Trustees are responsible for the administration, compliance and investment strategy of their SMSF and must adhere to strict rules. Failure to meet your obligations under super and tax laws could result in financial penalties or disqualification as a trustee. If you don’t feel comfortable managing these requirements yourself, it’s important to seek specialist advice and support; however, as trustee you are ultimately responsible for the operation and compliance of your SMSF.

3. You should have an appropriate minimum balance to operate your SMSF

For SMSFs to be cost-effective, generally you need a starting balance of at least $300,000 and an expectation that the fund will continue to grow. In addition to establishment costs, including a trusts deed and creation of a corporate trust (if applicable), some of the ongoing costs associated with running an SMSF include an annual tax return and audit, ATO fees and investment fees. You can also choose to pay for professional SMSF support services to help with the management and compliance of your fund.

4. You cannot receive statutory compensation for your SMSF due to theft or fraud

Unlike industry and retail super funds, which are subject to regulations from the Australian Prudential Regulation Authority (APRA), SMSFs are not subject to the same government protections. This means that in the event of theft or fraud resulting in financial loss, SMSF members cannot apply for compensation via the Australian Government’s Superannuation Compensation Scheme. 

5. You must seek advice if you are planning to live overseas for an extended period

In order to establish and manage an SMSF you need to be an Australian resident. If you expect to reside overseas for extended periods (one to two years or more), it is best to seek professional advice. The Australian Taxation Office has strict rules and regulations regarding extended leave from Australia, and if you do not follow the guidelines implicitly your SMSF could be deemed non-compliant and incur heavy penalties. 

6. Specialist support providers are available to help you establish and run your SMSF

It is a good idea to enlist help to establish and manage an SMSF. Even if you plan to do the majority of the work yourself, you will still require an independent auditor and possibly an accountant and actuary. Many trustees also look to professional SMSF support services for assistance with administration, compliance, accounting and investment advice.

7. Consider holding insurance cover with your existing super fund

It may be beneficial to hold total and permanent disability insurance and life insurance through superannuation. If you are considering switching to an SMSF, it may also be beneficial to maintain any existing insurance cover by not fully closing down or rolling over all your superannuation. If you are looking to replace your existing insurance cover, you will need to consider the costs and benefits. 

8. You will need to be aware of complaints and dispute resolution mechanisms

Disputes and complaints may arise during the time you manage your SMSF. Although SMSF trustees do not have access to the Superannuation Complaints Tribunal (SCT), they are able to access the Financial Ombudsman Service (FOS) and the Credit and Investment Ombudsman Service Limited (COSL) for independent dispute resolution services. 

9. The structure of your SMSF is your decision

If you decide to establish an SMSF, you will need to choose between setting up a corporate trustee or using an individual trustee. You should speak to a professional advisor about the benefits and limitations of both structures and what is most appropriate for you.

10. You are responsible for devising an exit strategy if you close your SMSF

At some point you may want or need to wind up your SMSF. As trustee, you need to have considered an exit strategy to help make this process as simple as possible and to be aware of the costs involved with ending your fund. A professional advisor can assist you with this plan.

Let us help you assess if an SMSF is right for you

At Dixon Advisory, we partner with over 8,000 SMSF trustees. We provide them with expertise on superannuation, retirement planning, and wealth creation and protection. With a team of in-house specialists, we offer the knowledge and advice our clients need to aid their decision-making and improve financial confidence. If you’re considering an SMSF, our highly qualified team can help you assess if an SMSF is right for you. 

Discover if self managed super is right for you

Find out how we can help you achieve your retirement goals by talking to one of our SMSF directors.