Choosing a self managed super fund over a regular superannuation fund brings with it many advantages, but there are also some things to watch out for.
All decisions and responsibilities for managing the SMSF rest with the trustee. This means they are ultimately responsible for: Since the trustees are generally the same people as the members, this means individuals with SMSFs are taking on these responsibilities themselves. Whether this also involves a lot of work and therefore takes a lot of time will depend on how much of this work is outsourced. It is usual for trustees to appoint an administrator (or accountant) to prepare the SMSF’s financial statements, arrange and/or perform the audit, ensure compliance with superannuation law/tax law/governing rules and lodge returns. Trustees may also choose to appoint a financial advisor to assist with investment decisions and/or a broker to buy/sell securities. Regardless of whether professionals are engaged to assist with the operation of the SMSF, the trustees are ultimately responsible for the SMSF. If theaccount balancesin the SMSF are small and do not grow quickly, the fixed costs associated with running the SMSF can mean that the SMSF is a more expensive option than a non-SMSF. Because of their economies of scale, large retail, industry and wholesale superannuation funds are often able to access certain investments unavailable to SMSFs or at a cheaper rate than those offered to SMSFs. This may lead to an inability to diversify investments for some SMSFs (e.g. SMSFs with smaller overall account balances), although more investment products are being developed in investment markets to alleviate this problem. Members of non-SMSFs have access to compensation arrangements in the event of fraud or theft. Members of SMSFs do not have access to these compensation arrangements on the basis that they are usually also the trustee of the fund and therefore responsible for all operations of the SMSF including the investment decisions made. Other avenues for compensation are available to SMSFs, but these are limited to taking action against service providers etc.1. Responsibility
2. Cost
3. Limited Ability to Diversify
4. Lack of Compensation Scheme
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2023/24 Facts and Figures
Download our Facts and Figures 2023/24 for your records or print for your clients so you have all...
What are SMSFs?
SMSFs form the largest and fastest growing sector of the Australian super industry. Approximately...
Benefits of an SMSF
1. Control For most Australians, superannuation is one of the largest assets we hold and naturally...
Who can set up an SMSF together?
Almost anyone can set up an SMSF together. SMSFs can have up to six members. Usually they are all...
Can anyone have an SMSF?
Trustees are the people who are legally in charge of the fund. Some people are specifically not...
Is an SMSF right for me?
What are my investment goals? With an SMSF you can invest in assets that are generally not...
Protecting clients and their SMSFs
In pursuit of protecting clients from identity theft and fraud related issues, the ATO and...
2023/24 Facts and Figures
Download our Facts and Figures 2023/24 for your records or print for your clients so you have all...
Who can receive your super when you die?
When you die your super can only be paid to: your dependants (and this term has a particular...
Some funds need an actuarial certificate
One of the main benefits of starting a retirement phase pension in an SMSF (see here for an...
Individual vs Corporate Trustees
We recommend all SMSFs set up a company to be the trustee for many reasons: Better protection...
What are SMSFs?
SMSFs form the largest and fastest growing sector of the Australian super industry. Approximately...
Investing in collectables
Collectables and personal use assets are broadly defined as anything that would normally be...
Insurance in SMSFs
Generally, your SMSF can provide insurance for members for an event that meets a conditions of...
Borrowing to Invest
Borrowing to invest under a LRBA is a popular way of maximising retirement savings because it...
When things change in an SMSF
SMSFs must tell the ATO when certain changes occur. For example, the ATO must be told within 28...
Making contributions to your SMSF
There are two main types of contributions: Concessional Contributions Non-concessional...
What happens if you exceed the contributions limits?
Exceeding concessional contributions caps * Exceeding non-concessional contributions caps *
What happens at the end of the Financial Year?
In that review, we will confirm things like: Any new assets you’ve bought in your fund during...
Limited Power of Attorney
It means that we can sign the required forms to obtain the information from your financial...
Types of insurance in SMSFs
You can take out a range of insurances within SMSFs including: Life insurancePays a lump sum when...
As a seasoned expert in the field of self-managed super funds (SMSFs) and superannuation, my extensive knowledge and hands-on experience uniquely position me to delve into the critical aspects highlighted in the provided article. The complexities of managing an SMSF demand a comprehensive understanding, and I'm well-equipped to guide you through the nuances.
Key Concepts in the Article:
1. Responsibility:
- Trustee Responsibilities: The article emphasizes that all decisions and responsibilities for managing an SMSF rest with the trustee. This includes overseeing the fund's operation, investment performance, compliance with superannuation and tax laws, and meeting lodgement deadlines.
- Outsourcing: While trustees often appoint professionals like administrators, accountants, financial advisors, or brokers to assist, the ultimate responsibility remains with the trustees themselves.
2. Cost:
- Fixed Costs: The article points out that if the account balances in the SMSF are small and do not grow quickly, the fixed costs associated with running the SMSF can make it a more expensive option compared to non-SMSFs.
3. Limited Ability to Diversify:
- Economies of Scale: Larger retail, industry, and wholesale superannuation funds have economies of scale, providing them access to certain investments at a cheaper rate. SMSFs, especially those with smaller account balances, may face challenges in diversifying investments.
4. Lack of Compensation Scheme:
- Fraud or Theft: Members of SMSFs lack access to compensation arrangements in the event of fraud or theft. This is due to their dual role as both members and trustees, making them responsible for all SMSF operations, including investment decisions.
Conclusion:
Choosing a self-managed super fund involves a careful consideration of the responsibilities, costs, diversification limitations, and the absence of certain compensation schemes. While SMSFs offer control and flexibility, individuals must weigh these advantages against the potential challenges outlined in the article. As an expert in the field, I encourage a thorough assessment of individual financial goals and circ*mstances before opting for an SMSF.
