When To Consider Switching To A Self Managed Super Fund

Most working Australians began their working life with the retail or industry superannuation fund offered by their first employer. As at 2018, the ATO estimates that around 39% of the 15.6 million Aussies with super have two or more accounts. That’s a lot of retirement investment spread around, with each super account attracting its share of fees.

Understanding Your Superannuation

It’s clearly never a bad time to review your superannuation to see if you’re getting the best possible return from your current fund (or funds!). When looking at the options, it’s also worth considering whether a self-managed superannuation fund (SMSF) is right for you.

The difference between being a member of a retail or industry super fund and your own SMSF is essentially that with an SMSF, you become the trustee of your own superannuation. Instead of paying fees to a third party trustee to make all the investment decisions, you establish your own trusteeship and are free to make the investment decisions yourself. Of course, you also become responsible for complying with the relevant ATO super and tax laws.

(The ATO provides some basics on the benefits and responsibilities.)

What You Need To Know About SMSFs

The risks in establishing an SMSF lie primarily in ignorance – when you don’t know enough, it’s possible to accidentally break the relevant laws and be faced with penalty tax that could undo all the benefits of lower fees and greater investment flexibility. It also helps to be savvy about what makes a good investment and how best to spread your investment choices for the best return at the lowest risks.

However, with good guidance from financial experts, it’s possible to set up an SMSF, even with a nest egg of less than $200,000. The trick as always is in finding investments that provide strong returns that generate more income than you spend in fees.

SMSFs have a wider range of investments open to them than regular retail and industry funds.  ASIC notes that SMSFs can invest in shares, property, even collectibles like art and antiques provided the investor meets the strict rules disallowing personal use of the items. Some SMSFs are even able to invest in cryptocurrency.

According to BT, the pluses of managing your own super include control over your investment decisions, investment flexibility, tax management and estate planning.

Continuing to engage a financial adviser can also see the legally required administrative tasks – tax returns, financial statements and audits – managed on your behalf. What that costs you in fees may easily be made up in better informed investment decisions and expertise in helping you meet your legal responsibilities.

Super fund self-management isn’t the solution for everyone, but it may be more feasible than you think. When you’re next assessing your finances, speak to your financial adviser about whether you’re in the best position to benefit from an SMSF.

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