Is an SMSF appropriate for you?

The banking royal commission has been in the news recently for all the wrong reasons. The findings have many people asking the question – who can I trust? As a result, people may be considering a self-managed superannuation fund (SMSF) where they can control what is happening to their important retirement nest-egg. Though running an SMSF is not a simple process and people need to determine if it is appropriate for them. We outline some important issues to consider.

Control

An SMSF is run by you and the other trustees. As a result, you are responsible for selecting and managing the funds investments. You need to be confident in making appropriate investment decisions that are in the best interests of the fund. The trustees must remember that the SMSF and its assets must be used solely to provide benefits to the members for their retirement.

You will need to invest time in managing your investment portfolio. This does not mean you need to go it alone but ultimately you are responsible for the SMSF’s investment decisions.

Compliance

Trustees are responsible for the administration of an SMSF and ensuring the fund is compliant with the relevant legislative requirements. Failure to meet these obligations could result in financial penalties. There is plenty of specialist support and advice to assist trustees in this area however the trustees have ultimate responsibility. Trustees can delegate duties, but not the responsibilities.

Minimum Balance

You may be asking what the minimum balance requirement is for an SMSF. There is no simple answer and ultimately it depends on everyone’s unique situation. There is no shortage of literature and opinions about this topic but ultimately there is no simple answer. What is important to consider is what are the reasons for setting up the SMSF in the first place? For some people, minimum balance will be important and for others it may be more important to access certain investments.

Costs

You need to consider what it is going to cost to establish your SMSF and then the ongoing costs associated with running your SMSF. Typical ongoing costs include preparation of financial statements and tax return, audit, ATO fees and investment fees. These costs should be compared against the costs of your current superannuation fund

Performance

If you set up an SMSF, will the SMSF outperform your current superannuation fund? You should consider the return on your assets (income and capital) and then deduct any costs associated with running your SMSF.

Everyone’s situation is unique. When deciding if an SMSF is appropriate for you, we recommend you consult an Accru advisor. Contact your local office and see how Accru can help you plan your future. 

About the Author
Martin Rush , Accru Perth
Martin’s hands-on approach to understanding his clients’ needs enables him to find the best possible solutions for them. His approach builds trust and has enabled him to forge many long-term relationships over his 20-year career. Martin Rush joined Accru Page Kirk & Jennings in 1993 after completing his Bachelor of Business degree. He was promoted to partner after 12 years with the firm. His professional experience includes three years working in London with the National Audit Office and Audit Commission.
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