Self Managed Super Funds (SMSF)
Many people are aware that they can be managing their own superannuation. The government allows them to do this, so long as they undertake to still comply with all the various rules and regulations.
Managing your own superannuation fund is not for everyone. There are some very attractive advantages, as well as very unattractive disadvantages. Some of these include:
| Advantages | Disadvantages |
|---|---|
| Widest possible range of investments | Most people don’t use most of those choices |
| Allows you to invest in Direct Property | Direct property is illiquid and lacks diversification so often all your retirement eggs are in one basket |
| Allows you to borrow for Direct Property Investments using a Limited Recourse Borrowing Arrangement | The amount you can borrow is generally lower than you can borrow personally and often the interest rate is higher |
| You get to make all the decisions | You need to document what you are doing and maintain compliance with annual tax returns, profit and loss statements, balance sheets, member statements, an investment strategy, audit reports and minutes of meetings |
| The cost can be very attractive, particularly for large balances or when using simple investments | The cost can be quite expensive, particularly for smaller balances or when using complicated investments |
| The fund is operated specifically for the benefit of a small group or family | Relationship breakdown within that small group or family can result in a fund being paralysed or worse - non-compliant |
It is important that when running a SMSF that you understand the rules and are doing it for the right reasons. Getting professional advice is critical because a mistake can be extremely costly and result in a fund being considered non-compliant. The ATO takes non-compliance very seriously, and in addition to a range of administrative penalties, a non-compliant fund can potentially lose nearly half its assets in tax.
At Aspire Financial Consulting, we are accredited to advise on SMSF’s and can help you to weigh up the options when considering a SMSF and make the most of a fund already in place. We work alongside your accountant or fund administrator to help you understand the rules, avoid the pitfalls and utilise the potential for your fund.