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Is an SMSF the right vehicle for your super?

If you’re thinking about getting your own SMSF, there are several important considerations before jumping into the driver's seat.

You may have heard that a Self-Managed Superannuation Fund (SMSF) can be a great vehicle for Superannuation. They can allow greater flexibility than industry or retail super funds for investments such as real property and alternative assets, and in structuring retirement income and estate planning. There are many instances in which we recommend an SMSF as the best solution to satisfying a client’s needs.

Important considerations

However, if you’re thinking about getting your own SMSF, there are several important considerations before jumping into the driver’s seat.

Setting up an SMSF is a serious commitment. We always encourage clients to consider the suitability of an SMSF for their circumstances, skills and experience, time availability, and psychology.

The compliance responsibility

When you are a member of an SMSF, over 18, and not under a legal disability, you are also either a trustee of the SMSF or a director of the SMSFs corporate trustee. As trustee, you are in complete control of your investing, which means you are also solely responsible for keeping up to date with your compliance requirements.

The laws and regulations governing SMSFs have become more onerous in recent years, demanding greater attention and diligence in meeting compliance reporting and requirements.

Fortunately, the investment platforms available to SMSF trustees and their financial planners can help ensure compliance. Nonetheless, as an SMSF trustee, it is ultimately your responsibility to ensure your fund is compliant. The tax penalties and costs associated with non-compliance can be significant.

Are you ready to take control?

One of the primary motivations for some setting up an SMSF is the idea that it is a sure path to outperforming the returns they would get from a traditional super fund. It may seem that SMSF success stories abound, although there is rarely a mention of the investment calls that went bad.

Those with time, knowledge, and experience may occasionally outperform, but others are intimidated by the risk associated with investing their life savings and over-invest in cash. It is common for the unadvised, the less experienced, and occasionally over-confident to fall short of the benchmarks set by professional fund managers, especially over the long term.

Investment analysis and strategy are critical to the success of any SMSF. Many trustees work alongside a trusted financial planner to access more information and advice on investment options and strategies aligned with their long-term goals and income security in retirement.

Ensure all members are involved

SMSFs can have up to six members pooling their superannuation savings in the fund. It’s important that all trustees are involved in the SMSF across decisions such as:

  • Administration – who will run the fund and ensure it is compliant?
  • Transactions – who will manage investment transactions?
  • Investments – how and who will make decisions about these? In many instances, the members decide that the answer is to outsource fund management to a financial planner, preferring to just collaborate on changing priorities and strategy.
  • The future – what happens if the principal member and fund manager dies? Often SMSFs become the sole responsibility of a surviving partner, who must be confident in continuing its operations and investments.

SMSF’s members must evaluate their skills and experience and determine what they prefer and can manage themselves and what they outsource to other professionals.

Is an SMSF right for you?

Consider your level of comfort with investments and the control you want over your super. Research each option and seek professional advice before making any decisions. Ultimately, finding the best superannuation option for you will depend on your individual needs and goals.

Establishing and maintaining an SMSF requires an objective and honest assessment of your abilities and the willing and active participation of all fund members.

This assessment is usually best conducted in consultation with a financial planner, your accountant, and maybe even a legal specialist in estate planning.

Contact us for a confidential discussion on whether an SMSF may be the right Super vehicle for you.

Aquinance Pty Ltd is a Corporate Authorised Representative of Lifespan Financial Planning Pty Ltd (AFSL 229892). The purpose of this website is to provide general information only and the contents of this website do not purport to provide personal financial advice. Lifespan strongly recommends that investors consult a financial adviser prior to making any investment decision. The contents of the Lifespan website does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions. The information is selective and may not be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in any particular product, investment or security. The information provided on this website is given in good faith and is believed to be accurate at the time of compilation.