Is an SMSF right for you?
There are many advantages to running your SMSF. Still, if it is not set up correctly, it can significantly affect your retirement plans, not to mention the fund’s eligibility to receive contributions and tax concessions.
But the first step is, you need to be sure an SMSF is right for you and your circumstances. Below we have listed a few points to consider.
- What can an SMSF invest in
- Are self managed super funds worth it?
- How do I get an SMSF?
- How much does it cost to run an SMSF?
- What is your current super balance?
- Why do you want an SMSF?
- What are the costs and time commitments of running an SMSF?
- Establishing your SMSF
- What is involved in Administering a SMSF?
What is your current super balance?
During the accumulation phase, we recommend a starting balance of at least $300,000 (however, this can be dependent on individual circumstances).
Although you can commence an SMSF with a lower balance, associated set up and running costs along with your personal time and effort, you must allocate to administering your SMSF must also be considered.
Why do you want an SMSF?
The most common motivation for establishing an SMSF is to have control over your superannuation. SMSF provides the ability to access a wide range of investment opportunities and flexibility including, in some cases, to invest in property.
However, superannuation law is complex, and you must be aware of your responsibilities as a trustee and restrictions that may apply under regulations to ensure your SMSF remains compliant.
What are the costs and time commitments of running an SMSF?
SMSFs require trustees to be actively involved in making necessary decisions, e.g., deciding on an investment strategy and ensuring compliance with superannuation law and other reporting obligations.
SMSFs incur various costs, these include initial establishment, accounting and audit costs, as well as costs associated with administering the fund. These costs are contingent on a number of factors, so can vary from fund to fund.
Establishing your SMSF
Once you have investigated whether an SMSF is right for you, there are several steps involved, these include:
- Deciding on fund members and trustees
- Establishing the fund and trust deed.
- ATO/ABN registrations
- Setting up bank accounts
- Developing a compliant investment strategy
- Arrange for your fund to be “SuperStream” Ready
- Rollover existing superannuation accounts
- Organise future employer contributions to be paid into your new fund
What is involved in Administering a SMSF?
There is a number of responsibilities in relation to administering an SMSF, these include (and are not limited to):
- Ensuring contributions accepted by the fund meet the age and work tests and are within allowable limits
- Regularly review the investment strategy
- Ensure assets held by the fund are correctly valued;
- Appoint a registered SMSF Auditor to audit the fund each financial year;
- Arrange for statutory financial statements to be completed and lodge tax returns
- Pay the Supervisory levy and arrange payment of any outstanding income tax due.
- When it comes time to receive a pension, there are other additional responsibilities such as, e.g., ensuring a minimum level of pension payments are made, decide on which assets that may need to be sold to provide a pension etc.
All these responsibilities lie solely with the trustee, so it is common practice for trustees to use the services of an SMSF Administrator, such as Super Advisor to ease the administrative burden.
The decision to start an SMSF involves more than just deciding whether or not to establish an SMSF. For advice on whether an SMSF is right for you or assistance in administering your existing SMSF, contact Super Advisor for a free, no-obligation consultation.
Disclaimer: The above information is provided for general informational purposes only and does not take into account individual objectives, legal and tax circumstances and needs. The data can in no way, be used as a substitute for legal, tax and financial product advice. Before making any decisions, you should seek individual professional advice to take into account your personal circumstances before proceeding. Super Advisor Pty Ltd does not warrant the above information to be complete and all-encompassing, nor relevant to every situation. No warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided is not to be considered financial product advice for the Corporations Act 2001.