A Self Managed Super Fund (SMSF) is a private superannuation fund, and a way for you to take full control of your retirement and future finances. A SMSF is a legal structure and is regulated by the ATO. It differs from other super funds in that the members of a SMSF are also the trustees, so they’re responsible for complying with superannuation laws.

Choosing to start a SMSF is a great way to gain flexibility and control over your retirement. But it’s also a big responsibility, and takes a lot of time and effort to make sure it’s set up and managed correctly.

SMSFs basics 

Make sure you have all the basics covered before you start because, when setting up a Self Managed Super Fund, there are many things to consider.

First you have to decide whether an individual or corporate trustee structure is right for your SMSF. Your SMSF can have up to four members and all members must be trustees, or directors, if you’ve appointed a corporate trustee.

You need to think about the costs associated with starting and running a SMSF, which generally are fixed. There’s no minimum balance required to set up an SMSF, but it usually becomes cost-effective once you have a balance of $250,000 or more.

You will need to pay the annual supervisory levy to the ATO and arrange for an accountant to prepare the financial statements and tax return, and conduct an independent audit. You may also choose to pay for financial advice and insurance for members.

There are many benefits to starting a SMSF. You have full control over your finances and future, and can make choices that benefit your specific circumstances to maximise your earnings. You’re able to make your own choices about your investments, and can invest in anything provided it’s allowed by the investment strategy prepared by the trustees, and meets the sole purpose test (which means assets must be held ONLY to provide for members in their retirement). You can also derive significant tax benefits.

There are also some risks involved such as penalties for non-compliance, lack of statutory compensation and lack of access to conflict resolution channels if disputes arise.

Deciding if the benefits outweigh the risks is up to you. But be careful as you assess the information and don’t be put off by some of the myths surrounding Self Managed Super Funds.

Some key myths that persist around SMSFs are:

  1. You need to be wealthy to have a SMSF – While you need to have a substantial opening balance (around $200k) there’s no minimum balance needed to open or run a SMSF.
  2. SMSFs are too risky – You’re in charge so the level of risk depends on how you choose to manage your SMSF. But getting the right professional help and support will ensure you comply with all the rules and minimise the risk factors.
  3. SMSFs are a simple way to buy property – There are numerous conditions associated with the purchase of property through a SMSF, so we recommend you research this option thoroughly (check out our Guide to Buying Property through a SMSF) and get professional advice before making any decisions.

Buying property through your SMSF

The most important thing to know is that buying a property through a SMSF doesn’t follow the same procedure as buying a property personally. There are additional restrictions associated with getting a bank loan (including considerations for using a limited resource borrowing arrangement), and tax implications that need to be considered. You should also look at the implications of purchasing a commercial property or an overseas property through your SMSF.

You should also know…

Let us help with your SMSF

Navigating the path to setting up and managing your own SMSF can be challenging, and it really helps to have knowledgeable advisors by your side to avoid making mistakes and running into trouble with the Australian Tax Office.

SMSF Solutions is a specialist division of the H&R Block Group providing administration, compliance, accounting and taxation services for Self-Managed Superannuation Funds (SMSF).

We’re experts at what we do, and strongly believe in educating our clients to help them make the very best decisions. Our goal is to help you prepare for your future and to make the most of your money. We’re on your side, and we will always advise you with your best interests in mind.

Book an appointment

Navigating the path to setting up and managing your own SMSF can be challenging, and it really helps to have knowledgeable advisors by your side to avoid making mistakes and running into trouble with the Australian Tax Office.

Book now

Book an appointment

Navigating the path to setting up and managing your own SMSF can be challenging, and it really helps to have knowledgeable advisors by your side to avoid making mistakes and running into trouble with the Australian Tax Office.

Book now