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December 1, 2024Can I claim a tax deduction for my family home?
March 25, 2025Setup a SMSF or Not?
Firstly it’s important to know that an Self Managed Super Fund (SMSF) is not for everyone. In fact only very tiny percentage of people will actually open their own self managed super fund. And it’s important you seek financial advice from a registered financial advisor before instructing your accountant to go ahead and setup the SMSF.
Secondly it’s almost never cheaper from a fund administration point of view. SMSFs are expensive to run and they require constant management to obtain the best returns and you need to ask your self and answer honestly “Do I have the skills to invest money?” And even if you do have those skills you will need a team of professionals to make a SMSF work. You will need a financial advisor to develop the investment strategy, an accountant to prepare the financial statements and submit the tax return and an auditor to audit the accounts to ensure compliance with super rules.
To help you navigate the decision making process around going ahead with a SMSF, we have collated the PROS and CONS for you to consider.
PROS
- You control the investment strategy
- You control the costs
- You can buy investment property in a SMSF
- You can borrow using a Limited Recourse Borrowing Arrangement (LRBA)
- You can invest in collectables such as art, stamps and coins
- You can invest in a wide array asset classes such as crypto-currency and gold
- Self-managed super funds have more flexibility to use tax strategies around capital gains, taxable income or franking credits
- SMSFs can have up to 6 members which means pooling more money to scale the size of investments and spread the management costs
- There is more estate planning flexibility and control, especially in regards to death benefit nominations
CONS
- Setting up a SMSF is expensive – at least a few thousand dollars
- You need a team of professionals – financial advisor, tax agent, chartered accountant and auditor
- Financially it only starts to make sense where at least $200,000 funds are under management
- You may make poor financial decisions if you do not have investment qualifications or experience
- There can be significant fines and penalties for non-compliance
- SMSFs require time. If you are busy with work or business you may not have sufficient time to devote to managing the fund
- There are ongoing costs associated with tax returns, audit fees and financial reports
Seek advice from your financial advisor and when you are ready to build your wealth with your own SMSF, reach out to Rider Chartered Accountants & Advisor to setup your fund. Many of the associated costs are published in our online professional fee schedule.
