May 19, 2017

A Self-Managed Super Fund (SMSF) is attractive to alot of people who want more control over their financial future.

If you're searching for ways to make your money go further, an SMSF may be the key to smarter investing.

But be warned - self-managing your super fund could also increase your financial risk.

You Are Accountable!

Too many people rush into setting up a SMSF with dreams of investing wherever they please. But managing your own superannuation comes with many limitations and obligations that a lot of people are not aware of. Legally and financially, you can't afford to ignore the responsibility that comes with your fund.

With the added control that comes with managing your own super fund comes increased responsibility, so while the DIY aspect of controlling your fund may be appealing, you have to be prepared to put in the work and attention to detail to make it a success.

Benefits Of An SMSF

With all the risk and accountability involved, why is it worth at least considering a SMSF?

A few advantages include:

  • Having unique control over your investments within the legal framework
  • Maximum tax payable on earnings is 15%
  • The tax is payable in the year a gain is realised
  • Control of the timing for asset disposal, meaning that realisation of gains can be deferred until such time that assets are supporting an Account Based Pension, when the income is taxed at 0%
  • SMSF is a prerequisite for an Account Based Pension
  • SMSFs can invest up to 100% of the fund's total assets in "Business Real Property"

Some feel that managing their own super fund will help keep costs lower and open up their options for investing. If you manage yours successfully, you have more power to decide how and when to go about funding your retirement.

Things To Keep In Mind

Managing your own super fund may sound like a lot of fun. But that doesn't guarantee that it's the right investment decision for you. While there are some tax benefits and freedoms to consider, you also have to swallow the hefty fees and intensive paperwork that comes along with an SMSF. Additionally, you should be prepared with a detailed investment strategy plan (on paper) to make sure your SMSF works for you.

You may find that managing your own fund and keeping it legally-compliant is more expensive than other options. If you don't properly maintain your SMSF, you risk copping some serious tax and legal penalties from the Australian Tax Office. And an SMSF is hardly the DIY project you'd expect it to be - you will need a lot of professional advice to successfully start up and manage your own super fund.

Don't forget to check your required insurances! Managing your own super fund requires you to independently purchase the life insurance that typically accompanies more traditional super fund setups.

Get Expert Advice

An SMSF could bring huge benefits, and it should go without saying that you get the best bang for buck when working with an experienced financial adviser. Seek professional advice from experienced, qualified and licensed financial advisers and find out if an SMSF is right for you. If it is, your adviser will guide you through all of the responsibilities and requirements. Don't forget, the accountability for your fund will fall squarely on your shoulders and yours alone, so it pays to get the right advice.

What Next

For expert advice and support with your superannuation and retirement plans, contact Calder Wealth Management for a free no obligations discussion about your situation.

Contact us or call 08 8373 3333 to arrange a free, no obligation appointment. 

Written by Ben Calder, Private Client Adviser at Calder Wealth Management.