Seeking Greater Control of Your Super? Self-Managed Superannuation Funds Aren't the Only Option, but They're Worth Exploring for Some

Is an SMSF the right vehicle for your super?

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 some instances in which we recommend an SMSF as the best solution to satisfying a client’s needs, however that is a lot to unpack first.

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.

Want to know more?

1) You can click here to book a free 15-minute free clarity call with Sam Woodhouse to discuss how this may relate to you.

2) Join our Your Money Simplified email list to start taking control of your money today. And when you subscribe, I'll give you a PDF called My 3-Step Process for Building Your Road Map to Financial Freedom.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.