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Self-managed superannuation
funds (SMSFs) have many attractions but they are
not suitable for everyone. To help you make the
right decision, you need to ask yourself four
key questions.
1. What is your motivation
for setting up a self-managed super fund?
You need to
be aware that the assets you have in super are
strictly for your retirement. They are not to
be used as a cheap source of funds to run a business,
or for personal items or for anyone else outside
the fund. The personal use of holiday homes, art
to decorate your house and luxury cars are unlikely
to comply with these rules.
Likewise, you will not be able to access your
funds unless the usual conditions of release are
met. If you access your funds without meeting
these requirements, you could be subject to heavy
tax and legal penalties.
2. Do you have the time and skills to do the
job?
The trustees of self managed super funds are legally
responsible for its investments, records and reporting
requirements. This is not always easy, even if
you have professional help. Unless proper care
is taken, the fund might liable to a range of
severe penalties and perhaps even become non-complying.
3. Does it make sense on a cost/benefit basis?
In our view, you need around $200,000 in super
to make the costs of a SMSF worthwhile. Otherwise
the fund may have difficulty justifying the set-up
costs and ongoing expenses.
Depending on the number of investments and number
of trading transactions that occurred during the
year, SMSFs can cost around $1,500 and $2,000
per annum.
4. Will switching into a self managed fund
affect your current super?
Changing funds may have an impact on the benefits,
services and fees of your existing superannuation
fund. In particular, you need to ensure than you
don' t leave yourself without life insurance or
other insurance benefits. Exit fees may also apply
to some older super fund products.
If you do not fully understand the implications
of your decision, you should seek help from a
licensed financial adviser. Tax agents and accountants
may also be needed however they cannot advise
on any investment implications unless they are
licensed.
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