Self-managed super funds (SMSFs) are the fastest growing segment of the retirement savings market and can offer members a range of important benefits.
- Control over your investments
SMSF trustees have complete control over the fund’s investments, however they must develop and maintain an appropriate investment strategy.
- Greater flexibility
SMSFs give members greater flexibility in managing their super. This applies at all stages in the management process, not just investing. There are also estate planning, investment and tax strategies that are either much easier or are only possible with a self-managed fund.
- Possible cost savings
In most cases, the cost of managing a self-managed superannuation fund decreases as the fund’s assets grow. With most retail funds charging around 1.5% per annum in management fees, it does not require a very high balance before the cost numbers start to favour the SMSF option.
- Tax effectiveness
SMSFs generally provide more scope for tax planning than public offer fund. For example, trustees can sell share holdings on a parcel-by-parcel basis to reduce capital gains tax and other tax payments can be deferred until after the annual tax return is lodged.
- Estate planning
The fund can used to provide benefits to your spouse and children after your death which can allow for many estate planning benefits.
But their are also some responsibilities and challenges which need to be considered so it’s important to get professional advice before making any final decisions.
All decisions and responsibilities in regard to managing the fund rest the trustees. They are also responsible for ensuring that the fund complies with tax and superannuation laws. Failing to meet these legislative requirements can result in fines and other penalties.
- Limited investment diversification
Although SMSFs can invest in a greater range of assets, small funds may not have sufficient money to diversify across all of them. This is less likely to be the case with public offer funds which can provide access to investment opportunities in infrastructure, agriculture, international bonds, emerging market equities and so on.
- Can be expensive for small balances
Because a large proportion of SMSF administration costs are relatively fixed – e.g. accounting and audit fees, government charges and levies – you will need a reasonably large initial balance to make the fund viable on a cost basis.
- No access to the Superannuation Complaints Tribunal
SMSF members are not able to bring complaints or disputes about fund administration and management to the Superannuation Complaints Tribunal. The only option is court action which may be expensive and result in delays.
If you would like to discuss you options, please feel free to contact us for an appointment.