Self manage your superannuation

Self managed super funds (SMSFs) can give you more control of your retirement savings and provide the personal rewards of growing your own nest egg.

Are you ready for a self managed super fund?

The tax office, which regulates SMSFs, says that as at 31 March 2019 over 1.1 million Australians have their retirement savings invested in one of the nation’s 598,000 SMSFs. View the SMSF population table of annual data.

Managing your own super is a decision that should be considered carefully. There are benefits to using SMSF, however there are also some items which you need to consider to make sure that it is the right option for you. 

Control over your nest egg

Using SMSF can give you more control over how your superannuation is invested. But you may not have as much freedom as you think. Notable restrictions apply to what SMSFs can and cannot do. 

Importantly, SMSFs cannot lend to fund members or relatives and fund assets must be kept entirely separate from members’ personal assets. That’s because the overarching rule is that your SMSF must invest for the benefit of your retirement.

Breaking any of these rules could see your SMSF facing tax penalties, or lose its tax concessions, which could have an impact on super balance for your retirement. In addition, penalties could be imposed on other members of the SMSF for breaching the rules.

Will an SMSF be cost effective?

If you manage your own super, you can expect to pay fund fees. However, running your own SMSF could involve considerable upfront and ongoing costs associated with establishing SMSF, ongoing compliance and administration fees and investment expenses like brokerage on shares. 

If you have a small superannuation balance, running your own SMSF could end up costing you more in fees and charges than investing your super in a professionally managed fund. The Australian Securities and Investments Commission has suggested that you should have at least $200,000 in superannuation before an SMSF is cost effective, however, the actual number will depend on the fund’s individual circumstances.

Are you comfortable with the legal responsibilities?

Every member of a self managed super fund is also a trustee, and that means each person is responsible for meeting the tax and legal requirements that SMSFs face and could be subject to penalties if these requirements are not met.  

You may be comfortable about meeting these obligations now, but staying abreast of the fund’s legal requirements could become more onerous when you are older and hoping to enjoy retirement.

The bottom line is that your super is too important to leave to chance. Think carefully about the decision to use SMSF, take advice from experts and weigh up the costs versus the benefits that will help you achieve a rewarding retirement.

Next: Five steps to setting up a self managed super fund (SMSF)

You can manage your own superannuation investments with a self managed super fund (SMSF). Setting up your own superannuation is a big decision and isn't right for everyone.

To learn more about self managed super funds, contact us or speak to your financial adviser
Not sure if an SMSF is right for you? It’s important to consider the costs of setting up an SMSF before you get started. Learn more with BT.
Self managed super funds can offer trustees more control over the taxation of their superannuation, but like all aspects of SMSFs, there are rules that apply. Learn more with BT.

Taking the time to lay some foundations for retirement can help you enjoy a rewarding lifestyle once you hang up your work boots. And the time to start is now.

This information is current as at 15/08/2016.

This information has been prepared without taking account of your personal objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs.

This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice.