News & Information

Pros and Cons of Self Managed Super

June 09, 2016

LifeTime Financial Group Pty Ltd offers a specialised range of Self managed Superannuation (SMSF) services.

We are accredited with SPAA (SMSF professionals Association of Australia), the peak professional body for Accountants, Financial Planners and Lawyers who offer specialised services and advice in this more complex area of Investing.

Anthony Stedman and Adam Watts both hold the SMSF Specialist Advisor™ accreditation.

We constantly come across clients who have been talked into setting up an SMSF arrangement and we often shake our heads in wonder. Whilst the technicalities of an SMSF are quite complex, there are a few simple common sense rules that should always govern your decisions.

Do you have a minimum of $200,000?

This is the recommended minimum as noted by the ATO for anyone considering an SMSF arrangement. We believe that $200,000 is not enough. We believe that $250,000 is an absolute minimum because of the costs of set up and ongoing management and tax reportingPlease visit the ATO to read their publication on this.

Don’t hold all your eggs in one basket

Whilst this seems to be sensible, we are continuously meeting clients who have set up an SMSF arrangement to hold a property. We are extremely concerned about this if the only asset you own in the SMSF is property. Particularly if you have had to borrow funds to complete the purchase.

We often meet clients who have been sold the idea of an SMSF by people who are spruiking property ownership in Superannuation. particularly those who want to sell you a property that is still in the construction phase. On the surface, this may seem attractive. We would strongly recommend that any client seek the services of a Financial Planner who specialises in SMSF Advice prior to committing to a purchase such as this.

Whilst Anthony Stedman and Adam Watts are accredited SMSF specialist planners, the SPAA website is a great starting point to find someone local who is accredited. Another great way to find someone to assist is to speak to friends who may have already found an Accredited planner that they are comfortable with

My friends have a Gold Coast apartment in their SMSF which they use during the school holidays

There is one really simple rule that will answer a lot of your potential questions…

If you use or enjoy an asset in Superannuation before you have retired, then it is in all likelihood against the law.

SMSF are really complex

Whilst it is true that SMSF rules are complex, an accredited planner is ideally positioned to assist you in getting the most out of SMSF.

Understanding what you are doing makes all the difference and Superannuation can become an engaging experience.

The following are some examples of the advantages and disadvantages of a Self Managed Super Fund arrangement….

Advantages

Investment Choice

You will have greater scope to invest in a wider range of investments than that which would be available through a public offer superannuation fund. Depending on your trust deed – these investments could include term deposits, bank accounts, direct shares, collectibles, real estate, etc.

Control

As trustees, you have complete control over the fund and its investments (within the legislative framework). As trustees, you make all the decisions. Of course, you are able to call on professionals (such as Lifetime Financial Group) to help you make these decisions.

Estate Planning

SMSFs may provide you with a range of estate planning options – including the form in which benefits are paid to your beneficiaries/estate (pension, lump sum or a combination of both). As trustees, you have complete control over the fund and it’s investments (within the legislative framework). As trustees, you make all the decisions. Of course, you are able to call on professionals (such as Lifetime Financial Group) to help you make these decisions.

Disadvantages

Trustee responsibility

Each trustee is responsible for the decisions and operation of the fund. This includes the overall legislative compliance. However, the trustees can seek professional advice where this is considered appropriate – for example, financial planning advice, taxation & legal advice, etc.

Extra costs

A SMSF has additional costs such as the auditing of accounts, tax return administration and supervisory levies. However, where the fund has significant assets, these costs can be relatively low as a percentage of the fund assets. LifeTime Financial Group would not generally recommend the establishment of an SMSF arrangement where the fund assets are less than $250,000

Complexity

Running your own SMSF can be complex. Whilst the team at Lifetime Financial Group can remove a considerable amount of this complexity, there is no doubt the SMSF path is much more involved when compared with public offer superannuation funds.

Remember to seek the services of someone accredited by SPAA before embarking on this journey.