Being able to own property directly through an SMSF also has its appeal, as does the ability an SMSF gives you to move quickly and change your investments in response to changing markets.
There are also good estate-planning opportunities, which can give trustees a greater level of certainty over who their super will go to when they die.
Setting the strategies
While control over investments is a key driver of SMSF uptake, it’s important to remember that they’re far from being a ‘set and forget’ investment strategy.
An understanding of the strategies and why they’re being employed is vital. You’ll also need to understand which strategies are best for the fund’s individual members at different stages, like the accumulation phase or the pension phase.
Managing the fund
Running an SMSF comes with a range of legal requirements around recording transactions, reporting to the ATO and having the fund audited each year. SMSF investors should also commit to keeping an eye on their investments to make sure they’re moving in the right direction.
It’s often the case that trustees aren’t fully aware of exactly what’s required of them, which is understandable because the laws are complex and can change frequently. But with good, structured advice and ongoing management, the compliance and paperwork responsibilities involved can be very manageable and not as burdensome as with some other investment options.
Getting advice
Seeking advice before deciding to start an SMSF can help determine whether it’s the right move for you.
As well as considering whether the benefits will outweigh the costs in the long term, an adviser will take into account things like consolidating family investments, as well as any tax advantages that might be available.
5 things to know before starting an SMSF
1. Understand your obligations. As a trustee of an SMSF, you’ll be responsible for meeting the fund’s compliance obligations. This includes rules on how to manage investments legally, your tax and auditing requirements, restrictions on member contributions and when you can access your super.
2. Have enough funds to make it worthwhile. According to the ATO, an SMSF needs to have at least $200,000 in combined investible assets to make it financially viable. The administrative cost of running a medium-sized SMSF is around $2,000 a year, plus you’ll have to consider extra fees for services you might need along the way for things like accounting, legal and investment advice.
3. Don’t underestimate the time commitment. While it’s not a full-time job, running a successful SMSF takes time and effort. As well as watching your investments, you need to stay on top of your compliance responsibilities and be able to manage any changes to SMSF rules. Make sure you’re up to the challenge before you start.
4. Make informed investment decisions. There’s a world of investment options available to SMSFs — all with different risk and return profiles — so it’s important to know which types of investments are most suited to you and your fellow trustees. And if you’re unsure, it’s worth getting trusted financial advice.
5. Get help if you need it. As an SMSF Trustee, the responsibility for managing the fund lies with you, but that doesn’t mean you have to do it alone. Depending on your financial situation and time constraints, support is available for anything from setting up your fund to meeting your compliance requirements and administering your investments.
