Should You Have Your Own SMSF?
A Self Managed Superannuation Fund is a private superannuation fund that the members manage.
SMSFs operate differently to industry or retail superannuation funds (such as AustralianSuper, Plum Super or HESTA etc) and below are some key considerations before deciding to set up your own SMSF.
Benefits of Using a SMSF
Investment choice and flexibility – you dictate the selection of investment assets, which may include a direct investment in property.
You may be able to use gearing to acquire assets in the SMSF (via a limited recourse borrowing arrangement).
SMSFs are subject to the same tax rates as industry or retail superannuation funds, however through a SMSF you can more easily put in place tax strategies that are suitable for your situation.
It may be cost effective to run your own SMSF if the balance is large enough and flexibility to implement your own investment strategy is paramount. In our experience, managing super balances below $500,000 in a SMSF may not generate sufficient benefit to justify the additional cost and compliance burden.
Risks and Responsibilities of Using a SMSF
SMSF members (who are also trustees or directors of the trustee company of the SMSF), are personally liable for all of the SMSF's decisions (such as formulating and implementing the investment strategy) and for meeting all of the SMSF’s compliance obligations.
Investment returns of your SMSF may underperform professionally managed superannuation funds.
You remain responsible for managing the SMSF even if your circumstances change — for example, if you get sick or become unemployed. Furthermore, complexities may arise if there is a relationship breakdown between members.
If a SMSF loses money through theft or fraud, it will not have access to any government supported compensation schemes.
If there is a dispute amongst members of a SMSF, they cannot access the Australian Financial Complaints Authority (AFCA) to resolve the dispute.
You should consider these points and seek professional advice to determine whether a SMSF is suitable in your circumstances. We are authorised to give personal advice for all superannuation needs, including SMSFs and will be happy to assist.
GENERAL ADVICE WARNING: This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Madison Financial Group Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances.
