Setting up a Self Managed Superannuation Fund(SMSF) can be complicated. Not getting it right can materially affect your financial situation and retirement plans.
The first question you need to be sure about is whether an Self Managed Fund is the right fit? Seeking specialised financial advice can help you determine this answer.
Some considerations include:
You must ensure you have an appropriate superannuation balance before considering an SMSF. While a low balance can be a red flag, it is not necessarily a barrier to entry. However, in many cases, establishing a fund with a starting balance of $200,000 or below may not be in your best interests. This is because SMSFs tend to be more cost efficient with larger balances.
You must also understand your motivation for establishing an SMSF. The most common motivation SMSF trustees indicate is control. Control of an SMSF allows individuals to have a wide range of investment choice, flexibility and engagement with their superannuation. However, superannuation law is complex and you need to ensure your ambitions are allowed by the regulations and will be able to achieved in an SMSF.
Costs and time
Self Managed Superannuation Fund’s incur a wide range of costs in establishment, the day to day running of the fund and other incidental costs, which unlike large super funds generally occur with fixed rates rather than as a proportion of your balance.
SMSF Options provide the best ‘full service’ fixed administration rates in Australia, so there will never be any surprises with the costs involved in running your fund.
SMSFs also require dedicated attention from trustees which will take time out of your daily life to manage. While we will be working alongside you to make this process as simple as possible, you will still be responsible for making decisions and performing ongoing tasks, such as paying a bill from your SMSF’s bank account. Understanding from the outset your legislated responsibilities and obligations before establishing an SMSF is important.
SMSF Establishment process
Once you have decided that an SMSF is right for you, you must engage in the establishment process. Our licenced, specialist advisers can help you to choose a trustee structure, select a trust deed, complete ATO registration and fund set up.
Investment Strategy and Insurance
Upon establishment you must also create an investment strategy which must be regularly reviewed.
Your investment strategy should be in writing and must consider:
- Diversification (investing in a range of assets and asset classes).
- The liquidity of the fund’s assets (how easily they can be converted to cash to meet fund expenses).
- The fund’s ability to pay benefits (when members retire) and other costs it incurs.
- The members’ needs and circumstances (for example, their age and retirement needs).
- Considering whether to hold insurance in your SMSF.
It is also common for trustees to be motivated by investing in property when establishing an SMSF. You should be sure that any investment in property, particularly when gearing is involved, is appropriate for your circumstances. Holding properties in an SMSF can also require some complex structures to ensure the law is being followed and specialist advice may be needed before making an investment choice. A lack of diversification, low balances and inappropriate property investments can have a detrimental impact on your retirement savings, therefore it is essential to go of these points with your adviser prior to establishing your fund.
How can we help?
At SMSF Options we cover all areas required to establish your SMSF, including Licenced Advisers, SMSF Specialist Advisers™, Registered Tax Agents and Registered ASIC SMSF auditors.
If you are considering an SMSF, please call us to discuss your particular requirements and circumstances in more detail. If you are based on the Gold Coast, please contact us on 07 5521 0029 to arrange a complimentary home appointment, including after hours if required.