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Self-Managed Superannuation Fund (SMSF)

What you need to know about Self-Managed Superannuation Funds (SMSF)

A Self-Managed Superannuation Fund differs from a superannuation fund managed by a fund manager, such as a large corporation or industry body.

A self-managed superannuation fund is managed by you.

A major benefit of a self-managed superannuation fund (SMSF) is that you have control over your funds and the way in which they are invested.

The main benefits of an SMSF are:

– You control the form of investment;
– You have greater flexibility with the fund;
– You can be more hands-on with the management of the fund;
– You can pool your resources with up to 3 other members, such as your spouse and/or children.

A self-managed superannuation fund can provide greater flexibility in Estate Planning.

Any assets held by the SMSF will not be dealt with as part of your deceased estate.

You deal with your share of the SMSF by executing a Binding Death Benefit Nomination. This determines who should receive the proceeds of your share in the event of your death. This document requires updating every 3 years.

Disadvantages a self-managed superannuation fund:

– Managing an SMSF does take time.
– If your finances are complex, you may need appropriate skills to manage the fund.
– SMSF’s are strictly regulated. You must comply with the regulations or you may inadvertently be non-compliant and lose benefits, such as taxation concessions.
– There is no statutory protection in the event of loss such as theft or fraud.
– Fees can be disproportional to the size of the fund if your SMSF is small.

How much does an SMSF cost?

There are certain setup costs for preparation of an SMSF. Such as the trust deeds and documentation to ensure the fund complies with all current rules and legislation.

There are also ongoing annual fees, such as audit fees and tax returns.

The investment strategy of the fund needs to be reviewed annually. If the investment strategy needs to be amended, this will come at a cost.

There are also costs involved if a member exits, or if the fund is closed.

If you have less than $200,000.00 to invest in an SMSF most experts suggest that it is not as cost-effective as using a large conventional superannuation fund. However, there is nothing to stop you from setting up an SMSF with less than $200,000.00.

All these costs can vary considerably depending upon the size of the fund and the complexity of the investments.

Before converting to an SMSF you should contact your solicitor and/or financial advisor for further advice.