Self Managed Superannuation Funds: Are they right for you?

Self managed superannuation funds (SMSF), like public superannuation funds, provide a channel through which to save for one’s retirement. They do however present a number of key differences from public funds. The advantages and potential disadvantages are listed below:

Advantages of SMSF

• SMSF’s are flexible owing to the wide array of investment options that you can choose. Likewise, you have greater control over how your money is invested.
• There are two ways to set up the trust:
  • Individual trustee – you can include up to 4 members (note these are not limited to being family members)
    Corporate trustee – here the members must be the directors. This is a good way to pool assets.
  • Use of a SMSF can present tax concessions such as reduction of the 15% tax rate from franked dividends.
• Life insurance provides tax benefit to the beneficiaries of your SMSF.

Disadvantages of SMSF

• SMSFs are not entitled to claim the financial assistance from the government, regardless of whether or not loss is incurred. However, individuals may be able to claim the pension, depending on the asset test.
• SMSFs incur greater costs than public funds. They require a tax return and audit at the end of each financial year as well as having a fixed or transaction cost. Furthermore there are costs involved in setting up the trust. For individual trustees, fees start from $660; limited recourse borrowing arrangements start from $3000.
• The ATO suggest that the minimum initial value to make a SMFS worthwhile is $200,000.
• SMSF trustees are personally liable for any decisions or behaviours of the fund. The trustees should keep up-to-date with all the relevant legislation to make sure the superfund meets all the legislative requirements.
• Not all employers can contribute to a SMSF. It is wise to check with your employer prior to setting your SMSF up.

Here are a few points to consider before making your decision:

• What are you expecting to contribute yearly?
• Are you prepared to pay tax/accounting fees of approx. $1500pa?
• Are you prepared to make monthly contributions?
• Did you know that once retirement age is met, there is a minimum monthly withdrawal?
• Should you choose the commonwealth super (CSS), you may need to contribute 5%of your salary for a basic contributions. Be aware that concessional ($25k – $35k/annual) and new concessional cap ($180k/annual) apply.

A SMSF is not necessarily appropriate in all instances, as such it is recommended to seek the advice of an accountant or financial planner before you make a decision.

If you have any questions regarding self managed superannuation funds or would like to book in for a consultation, feel free to email our team at info@gpla.com.au or call 07 5444 1022.