Is a Self-Managed Super Fund Worth It?

Superannuation Advice Brisbane

Wondering if a Self Managed Super Fund is Worth It?

Whether you’re approaching retirement age or if you are simply being proactive about how you are going to structure your retirement, you might be considering a self-managed super fund (SMSF). For many Australians a SMSF appears to be an attractive option for managing retirement wealth; but do you know whether it is worth setting one up – and how to go about it? At Finpro we are committed to helping everyday Australians manage their wealth and to make transitioning into retirement a profitable and rewarding experience. We wanted to dispel some of the myths around SMSF and to discuss the question of whether self-managed super funds are worth the hassle. With so many of our clients approaching us to find out about this option, we thought this was a relevant article to post. If you have any questions about SMSF after reading this then please get in touch with us on 1300 943 454 or contact us online to book a free consultation.

Self-managed super funds defined

A self-managed super fund is precisely that: a superannuation fund with up to four members. Every member is a trustee with duties and obligations who are responsible for the fund and its investment strategies. SMSF’s are regulated by the Australian Taxation Office and must comply with strict laws.
  • The sole purpose of your SMSF is to provide for your retirement
  • A SMSF has to follow an investment strategy that complies with your risk tolerance and retirement needs
  • SMSF trustees (members) have to have sufficient skill and time to manage the fund and meet the obligations of management
SMSF operations can be costly to run and to administer, and it is often the case that if you do not have assets of over $1 million to invest in the SMSF, it may not be a worthwhile endeavour to undertake. This is because the costs of administering and running your SMSF can erode your capital investment amount. This is where the key question of “is a SMSF worth it” comes from. In plain terms, if you have a fund with more than $1 million to invest and leverage, you will generally see competitive gains of around 5.6% return. That said, the figures that we looked at demonstrate that the majority of SMSFs have a balance of between $200,000 and $500,000. These funds are likely incurring high costs – but are there other benefits to setting up a SMSF which can balance out the higher costs? Because while it might be recommended to have a balance of over $1 million, it is possible to set up a SMSF with assets of around $200,000 – so is it worth it? After all, while your starting balance might be $200,000, you can engage in prudent investment that brings your net worth higher faster than a traditional managed fund could.

Advantages of having a SMSF

When you have a SMSF you have a range of advantages at your disposal that you might not be able to access with a traditional fund, including:
  • Flexibility with your investments and choice of asset strategies
  • Savings on your tax liability
  • Control over how your retirement savings will take place
  • Reduced administration fees in some cases
Of course, setting up a SMSF is not without its risks, which is why it is absolutely imperative to talk to a financial provider like Finpro before going ahead with setting up a SMSF. There are significant liabilities in place and structuring requirements that you need to meet.

Disadvantages of having a SMSF

Along with the flexibility and freedom to invest as you wish, there are some disadvantages to choosing a SMSF that might not be for everyone, including:
  • Added responsibility for managing the fund and making decisions along with your fellow trustees
  • Compliance and taxation responsibilities
  • Potential for penalties if you do not comply with regulations
  • Added running costs
Ultimately, there is a balancing act in place where you will need to work out whether the added responsibility of managing your own SMSF is worth it in exchange for the freedom to invest.

Set up your self-managed super fund with Finpro

If you’re considering setting up a self-managed super fund, you will need to seek professional advice and guidance to get started. At Finpro, we have a great deal of experience working with SMSF clients and can assist you with setting up and managing your super fund. We can assist with the entire process and ensure you comply with all of your requirements and avoid any penalties! Contact us today on 1300 943 454 or book your free consultation today to get started with greater financial freedom through a self-managed super fund.