If you are thinking about setting up a self-managed super fund, make sure you consider the costs, time, risks and skills involved.
When you set up a self-managed super fund (SMSF), the responsibility rests with you. You must make the investment decisions for the fund. You are also held responsible for complying with the super and tax laws. These are major financial decisions and you need to have the time and skills to do it.
As a trustee of an SMSF you’ll also be responsible for operating your fund within the law. You may face severe penalties and your fund may suffer tax consequences if you don’t comply with the laws.
An SMSF must be run for the sole purpose of providing retirement benefits for the members or their dependants.
For example, if your SMSF owns a holiday home, related parties can’t stay in it for any reason – not even when having renovation work done – because this constitutes use of the asset.
You need to make investment decisions for the SMSF, including formulating an investment strategy that you review regularly. You need to understand the restrictions on the investments an SMSF can make.
It costs money to set up and run an SMSF. You might find that the fees you pay for an SMSF are more than you would pay in another type of super fund. Every year that you have an SMSF you’ll need to pay for an independent audit and the supervisory levy.
Most SMSFs also pay for additional help, such as:
preparing the SMSF annual return
valuations of the SMSF’s assets
actuarial certificates for SMSFs paying income streams (pensions)
legal fees, for example if the trust deed needs to be amended
assistance with fund administration
insurance for members.
Your self-managed super fund (SMSF) needs to be set up correctly so that it’s eligible for tax concessions, can receive contributions and is as easy as possible to administer.
It’s best to see a qualiﬁed, licensed professional to help you decide.