Your super is one of the key investments that will determine how comfortably you live during your retirement years. So, it’s important to understand how choosing to start a SMSF can impact your financial situation – now and in the long term. According to the ATO, more than 1.1 million Aussies are members of SMSFs. And while they can be an effective solution, running your own fund may not be the best decision for everyone. In this blog, we look at answering the question: ‘Is a SMSF the right choice for me?’.
What Is A SMSF?
Put simply, a SMSF is a privately run super fund. SMSFs can have one or multiple members (since June 2021 they can now have up to six people). A point of difference between self-managed super funds and regular super funds, is that members must also be trustees of the SMSF.
When setting up and running a fund, you can manage the operations yourself or outsource the management, or part thereof, to a SMSF specialist.
Who Benefits Most From SMSFs?
While various sources determine $200,000 to be the minimum investment that you should make for your new SMSF, ASIC suggests that starting balances below $500,000 have lower returns after expenses and tax.
Therefore, SMSFs with starting balances under half a million dollars may be uncompetitive when compared with an APRE-related superannuation fund.
However, if the trustee manages the bulk of the administration and management duties — or they can significantly grow the fund very quickly — the fund can work in the best interest of the client.
The actual cost-effectiveness of your SMSF is the key consideration when looking at superannuation options. Do you feel confident that you have the time and expertise you manage the set-up, running and wind up your fund? Will you make all the right decisions – or are you just looking short-term and trying to save on professional fees?
SMSF members come from all occupations and salary brackets – it isn’t solely a super solution for the wealthy. However, knowing the optional and unavoidable costs (such as annual independent audit fees) of setting up and operating an SMSF will help you determine if it’s the right choice for you.
Why Choose A SMSF?
People often choose to start SMSFs because they want the freedom to choose and manage their own investments. They feel confident that their SMSF can outperform regular super funds.
Couples can also enjoy taxation benefits and other advantages, by combining their super into the one fund.
Through your SMSF you can invest in residential or commercial investment properties, as well as cryptocurrencies and collectibles.
SMSFs offer choice and responsibility for those bold enough to take control of their super. However, keep in mind that there are strict penalties for people who break the rules governing the running of SMSFs, so education and expertise is essential if you want to make the best possible investment choices.
Thinking About Starting A SMSF? We Can Set You On The Right Path
Greenview Accounting Group are your local SMSF specialists, offering a complete SMSF solution for Victorian clients. From ongoing compliance to purchasing property through an SMSF, we are on-hand to give you expert advice and support. Connect with our Bunyip or Narre Warren offices to find out more by phoning 03 5629 6133.
* The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organisation, employer or company.