4 Questions to Ask Yourself Before Opening an SMSF

Like many, you may resent the fees and inflexibility of the big super funds and figure you can manage things better. You may be wondering if it’s time to set up a Self Manager Super Fund (SMSF).

No question, an SMSF does afford you significantly greater control over your money. It opens the door to alternative investment options, such as property, and allows you to borrow money to invest, potentially maximising your returns.

Over 1 million Australians now have an SMSF, but is it the right choice for you and your family? Before you even take your first step in setting up an SMSF, we recommend that you ask yourself four simple questions. If the answer to all four questions is yes, then it’s time to start seriously exploring SMSF. But if the answer is no to any of these questions, it may be best to leave your hard earned retirement dollars in the hands of the professionals.

Do I have enough money to make an SMSF worthwhile?

There are ongoing administration and management costs associated with self-managing your superannuation. It’s important to check that the financial costs of the SMSF don’t outweigh the benefits.

Some of the costs associated with setting up and running an SMSF include:

  • Establishment costs;
  • Investment management and advice costs;
  • Asset valuation costs;
  • Preparing and lodging an annual SMSF return;
  • Auditing costs;
  • Tax accounts preparation.

A 2013 report by Australian Securities and Investments Commission (ASIC) found that the annual cost of running an SMSF with a balance of $150,000 can range from $1212 to $2536 for someone performing most of the administration themselves to $2517 to $7617 for someone who outsources all of the administration.

Based on these figures ASIC recommends a minimum $200,000 SMSF balance if you will be performing most of the administration. Obviously as you outsource the costs start to rise, so if you fully outsource all administration ASIC suggests you need a minimum $500,000 SMSF balance. Those are big numbers!

Do I have enough time to manage my own super?

Most of us spend very little time managing our conventional super fund. So it is important to recognise that managing your own super fund is going to require time and attention, and the more you outsource responsibility to financial advisers and accountants, the higher the cost to run your fund.

First and foremost you will need to set up an investment strategy that meets SMSF legal requirements and must remain abreast as circumstances and situations change, ensuring that your strategy remains appropriate.

You will need to take the time to familiarise yourself with the SMSF rules and regulations. And you need to keep up: the rules change regularly.

And finally, of course, your will need to invest time in accounting, administrative and compliance duties such as holding regular trustee meetings and keeping records of trustee decisions and fund transactions.

Do I have the knowledge and expertise to out-perform the professionals?

The big super funds employ professional investment managers to manage your funds. Investments are regularly reviewed, risks assessed and holdings adjusted. They also have in-house legal and finance teams, dedicated to ensuring that your fund is compliant.

You may think you can “do it better”, but do you really have the expertise to manage your money better than the experts?   Do you have sufficient understanding of the investment options available? Do you understand the importance of diversification to managing risk? Do you have a handle on the cash flow needs of the fund, taking into account the running costs and the benefit payments?

Do you really want the responsibility?

As a trustee to your SMSF you will be legally responsible for the fund. There is no recourse when things go wrong with your investments. The buck stops with you.

You are required to act in accordance with the fund’s trust deed as well as superannuation and tax laws. Where there is a failure to comply you may find yourself personally liable, even subject to criminal charges.

When you become a trustee you need to sign a declaration to confirm that you know and understand your legal responsibilities, so “but I didn’t know” or “I didn’t understand” will not cut it.

Are you sure you want to take on full responsibility for managing your superannuation?


If you answered yes to all of these questions and would like to talk about how to open a Self Managed Superannuation Fund, or if you are still not sure and would like to talk about some of the questions arising from this article, please give us a call.

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