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Is An SMSF Right For You?

Is An SMSF Right For You?

Before setting up and SMSF you have to consider a few things before jumping into having one for yourself as a trustee or member of the fund.

Be ready to have an active interest in the super fund. Most of the people with self-managed super fund look for greater control over their investments and optimise their retirement benefits or wealth. They also are confident in making investment decisions for the best interest of the fund and its members. As a member or trustee, time is an essential investment to properly manage and help the fund succeed. You can hire help from SMSF professionals in operating the fund, but as a trustee, you are still the person in control and responsible for its operation.

Be ready for the legal and administrative responsibilities that come along with the establishment of an SMSF. A trustee is responsible for the administration, development, execution, and maintenance of the investment strategy and compliance to laws of their self-managed superannuation fund. Strict rules are to be followed for its operation. Failure to comply with obligations of the super and tax laws can result in penalties for each trustee or even be the cause of becoming disqualified from being a trustee. Trustees can ask the help of professionals or an SMSF auditor to manage the obligations of a self-managed superannuation fund but the ultimate responsibility of operating and complying with laws is still on the members’ or trustees’ hands. To have an understanding of the self-managed super fund obligations, we suggest that you complete an online approved education course on self-managed superannuation fund by the ATO.

Have an appropriate minimum balance to put an SMSF to work. To be cost-effective, a starting balance of $300,000 is needed. It is expected that the initial balance will grow. Some of the costs that you need be prepared for are the establishment costs, trust deed creation and setting up of a company to function as corporate trustee. On-going costs are also involved in running the fund, which includes annual tax return, independent audit fees, investment fees and ATO fees. Additional costs might include fees of professionals who support your day-to-day operations, management and compliance of the fund.

Seek advice if you decide to live overseas for an extended period. An Australian residency status is needed to establish and manage a self-managed superannuation fund. Therefore, if you decide to live overseas for a period of two or more years, seek professional advice regarding this matter. ATO has strict rules and regulations about extended leaves from Australia. Some guidelines may deem a trustee non-compliant or be penalised if they are not followed.

Consider holding insurance cover from your existing super fund if you have one. If you are thinking of switching to a self-managed super fund from another super fund, consider existing insurances before rolling them over or closing any of your existing superannuation funds. If you decide to replace an existing insurance, consider the costs and benefits before doing so. Seek advice from a certified insurance professional regarding the implications of rolling over existing superannuation before setting up an SMSF.

Be knowledgeable of complaints, compensation, and mechanisms that resolve disputes. Complaints and disputes are likely to rise during management of the self-managed superfund. To help you resolve independent disputes, trustees have access to the Financial Ombudsman Service (FOS) and the Credit and Investment Ombudsman (CIO). These government entities will have representatives that will act as advisors for you regarding your predicament.

Be warned that self-managed superannuation funds are not subject to government protections that other super funds are. In the event of theft or fraud that results into financial losses, superfund members will not be able to apply for compensation from the government’s financial assistant program.

The structure of an SMSF is highly dependent on you decisions. You can choose between a corporate trustee or individual trustee for your super fund structure. But before you make your final decision, talk to a professional about the benefits of each structure and choose the one that is best for your circumstances.

Devising an exit strategy when closing the SMSF is your responsibility. Seeking professional advice in winding up the self-managed superannuation fund is very important. There will come a time that you might need to wind the fund up and there is a need to consider an exit strategy. Having an exit strategy will help simplify the process. Before winding it up, you have to know the costs in closing the fund. An example of an exit strategy is when the self-managed super fund is no longer cost-effective where there are increasing operational costs and decreasing fund balance.

If you need more help in deciding if an SMSF talk to us and we will help you.

Kingston Knight Audit are the Auditor Melbourne experts to contact when dealing with your trust account audit, SMSF Audit, financial statement audit,  and internal audit requirements. Contact us today, Kingston & Knight Audit offers a free telephone consultation to establish how we can best help you achieve the assurance and compliance you require.

Call our Melbourne team today on 03 9088 2242, or email us via