Is a self-managed super fund right for you?

A self-managed super fund gives you direct control over your retirement savings. It also makes you legally responsible for running the fund properly. Before setting one up, it is worth being clear on both sides.

How an SMSF works

An SMSF can have up to six members. Generally, every member must be a trustee, or a director of the corporate trustee, and every trustee must be a member. That means everyone in the fund shares responsibility for its compliance.

Potential benefits

• Control over investment choices, including direct shares, term deposits and property
• Flexibility to tailor strategies for contributions and pensions
• Pooling balances with family members to access investments that suit larger sums
• Estate planning options, with greater control over how benefits are paid on death

Costs to consider

An SMSF has fixed running costs that do not shrink with a smaller balance, including:

• Accounting and preparation of annual financial statements and the SMSF annual return
• The independent audit required every year
• The ATO's annual supervisory levy
• Investment platform, advice and bank fees

Because these costs are largely fixed, an SMSF with a small balance can be more expensive in percentage terms than a large public fund.

Trustee responsibilities

As a trustee you must:

• Run the fund for the sole purpose of providing retirement benefits
• Prepare and regularly review a written investment strategy
• Keep fund assets separate from personal and business assets
• Avoid lending to members or acquiring most assets from related parties
• Have the fund audited each year by an approved SMSF auditor
• Keep records and lodge the annual return on time

Breaching these rules can lead to penalties for trustees personally, and in serious cases the fund can be made non-complying, with significant tax consequences.

Questions to ask yourself

• Do I have the time and interest to manage investments and paperwork?
• Is my balance, alone or combined with family, large enough to justify the costs?
• What will happen if I lose capacity or a member leaves the fund?
• Do I have a clear investment plan, rather than a single idea such as buying property?

How we help

We prepare SMSF accounts and annual returns, coordinate the independent audit, and help with contribution and pension planning. For personal advice on whether an SMSF suits you, speak with a licensed financial adviser. See our SMSF services for details.