In Australia, Self-Managed Super Funds (SMSFs) have become increasingly popular among individuals seeking greater control and flexibility over their retirement savings. An SMSF gives you the power to take charge of your superannuation investments, but it also comes with responsibilities and considerations.
Here’s what you need to know.
Pros of Self-Managed Super Funds
Control and flexibility
An SMSF provides you with ultimate control over investment decisions. You have the ability to create a tailored investment strategy that aligns with your specific financial goals, risk tolerance, and values. This control extends to choosing specific assets, such as property or direct shares, which may not be available through other superannuation options.
Potential cost savings
Depending on the size of your SMSF, it may offer potential cost savings compared to traditional retail or industry super funds. With an SMSF, you have the ability to pool your superannuation savings with other family members, reducing overall administration and management fees.
Estate planning opportunities
SMSFs offer unique estate planning advantages, allowing for the effective transfer of wealth to beneficiaries. Through careful planning, you can structure your SMSF to provide for your loved ones in a tax-effective manner after your passing.
Cons and considerations of Self-Managed Super Funds
Time and expertise
Running an SMSF requires time, knowledge, and expertise. As a trustee, you are responsible for administrative tasks, compliance with superannuation regulations, investment decisions, and record keeping. It is important to evaluate whether you have the capacity and willingness to take on these responsibilities or if you would prefer to seek professional support.
Legal and regulatory compliance
SMSFs are subject to strict legal and regulatory requirements. It is essential to stay informed about changes to superannuation laws, reporting obligations, and compliance standards. Engaging a qualified SMSF professional, such as an accountant or financial advisor, can help ensure compliance and mitigate potential risks.
Investment risk and diversification
With control comes the responsibility of making informed investment decisions. It’s important to assess your risk appetite and diversify your SMSF investments to minimise potential losses. Adequate research and ongoing monitoring are crucial to maintain a well-balanced investment portfolio.
Is a Self-Managed Super Fund right for you?
Self-Managed Super Funds in Australia provide individuals with the opportunity to take control of their retirement savings and investment decisions. The flexibility, potential cost savings, and estate planning advantages can be appealing.
If you are interested in the world of Self-Managed Super Funds, we recommend working with an SMSF specialist who can support you in making the most of the benefits involved in owning an SMSF. If you have any questions along the way, feel free to reach out to the team at APS Tax & Accounting!
Written by Richard Ferraro, Chief Financial Officer & Head of APS Tax
Richard is a graduate of the Australian Institute of Company Directors (GAICD) and Fellow Certified Practising Accountant (FCPA) with 3 decades of experience in Financial Accounting, Tax Compliance and Advisory. Prior to the 11 years currently working at APS, Richard was a partner in a top 100 accounting firm, and a Taxation Manager for large corporations such as Nissan Australia, Bendigo and Adelaide Bank, NEC Australia and Australia Post.
Richard supports his clients across a wide range of services including tax compliance and advisory services to clients who are Companies, Trusts, Partnerships, Self Managed Super Funds, When Richard isn’t working he enjoys spending time with family and friends, watching the mighty Magpies, and anything to do with cars from F1 to supercars and collectables.