Running your own SMSF can be time consuming and even though you can appoint an SMSF administration service, which most trustees do, there are significant activities which need to be completed throughout the year.
All superannuation members should have an understanding of the investment markets and classes in which their super benefits are and could be invested. However, this is more important for members of an SMSF who have to make and implement the investment decisions of the fund.
In addition, when running your own SMSF you are required to form and regularly review an investment strategy which considers the risk, diversification, liquidity, solvency and insurance requirements of the fund.
Being a trustee of an SMSF means that you are running your own superannuation fund and as such, you have an obligation to comply with the super rules. Where you fail to comply, the Australian Tax Office (ATO) can levy a range of penalties which vary depending on the severity of the breach and can include compulsory education and/ or fines. The penalties can be quite harsh for serious misconduct.
Unlike members of conventional funds, members of SMSFs will not be eligible for compensation under superannuation laws if the SMSF suffers loss as a result of theft or fraud in the underlying investment assets.
SMSF members do not have access to certain dispute resolution mechanisms, such as External Dispute Resolution (EDR) Schemes for their SMSF benefits. Disagreements can be resolved through alternative dispute resolution techniques or in court which can be at the members' own expense.
Life and disability insurance can be more expensive and harder to obtain for SMSFs than for larger superannuation funds which can often also offer default levels of cover without a medical assessment. When establishing an SMSF you may want to consider whether to keep the account in your large super fund open with a sufficient balance to maintain your insurance.
In addition, there are a number of trigger events that may lead to needing to exit an SMSF in the future. These include a trustee becoming a disqualified person; non-residency; loss of capacity; lack of interest; relationship breakdown of fund members; death of a member or special estate planning needs. In addition, when you drawdown on your benefits, the balance of the fund may reduce below the point where the fund continues to be cost competitive.
Where one of these events occurs and the SMSF is to be wound up, there are generally three options available. These include rolling over the superannuation benefits to a public offer fund, converting the SMSF to a small APRA fund (SAF), or meeting a condition of release. There are costs involved in winding up an SMSF, however it is important to have an exit plan.
The information in this document has been prepared by BT Portfolio Services Ltd ABN 73 095 055 208 AFSL 233715 (BTPS) and is current as at 2 December 2016. The information provided is general in nature and does not take into account your personal needs, objectives or circumstances and therefore, before acting on it, you should consider whether it is appropriate for you.
BTPS operates BT Panorama Investments (the investor directed portfolio service operated by BTPS). BT Funds Management Limited ABN 63 002 916 458 AFSL 233724 (BTFM) is the responsible entity and issuer of interests in BT Cash and Westpac Financial Services Ltd ABN 20 000 241 127 AFSL 233716 is the responsible entity and issuer of interests in BT Managed Portfolios. An Investor Guide is available for BT Panorama Investments and a PDS is available for BT Cash and BT Managed Portfolios (the Panorama products). These disclosure documents can be obtained from BTPS by visiting www.bt.com.au/smsf or calling 1300 554 267. A person should obtain and consider the disclosure documents before deciding whether to acquire, continue to hold or dispose of interests in the Panorama products.
In addition, BTPS is the provider of the Panorama SMSF Establishment Service and the Panorama SMSF Administration Service. The Guide and Terms and Conditions for these services are available by visiting www.bt.com.au/smsf or calling 1300 554 267.
BTPS, BTFM and WFSL are subsidiaries of Westpac Banking Corporation ABN 33 007 457 141 (Westpac). Apart from any interest investors may have in Westpac term deposits or securities acquired through Panorama, an investment in or acquired through Panorama is not an investment in a bank or a bank deposit. Westpac and its related entities do not guarantee an investment in or acquired through Panorama Investments.