FocusOn - Is a Self Managed Superannuation Fund right for you?

Deciding to set up and run a Self Managed Superannuation Fund (SMSF) is an important decision which should be considered very carefully.

There are many different ways to manage your superannuation benefits and these should all be considered before making the decision that a SMSF is the correct choice for you.

What is a SMSF?

A SMSF is a specific type of superannuation fund designed for people looking for greater choice and control over their own retirement savings.  They are intended primarily for family members or close business associates where a trust is created which holds assets on behalf of its members for use in retirement.

The main features:

	Has less than 5 members
	Each individual trustee of the fund is a member and vice versa or each director of the corporate trustee is a member of the fund and vice versa
	No member of the fund is an employee of another member of the fund, unless those members are related
	No trustee of the fund receives remuneration for his or her services as trustee

What are the benefits?

	Trustees take an active role and determine where their money is invested
	Access to a broader range of investment alternatives including specific shares and direct property
	Ability to make “in-specie” transfers of assets into superannuation
	Ability to directly reduce the amount of tax paid by the fund by investing in assets which pay franked dividends
	Ability to run a pension within the same structure without affecting the investment mix and triggering capital gains tax
	potentially lower fees by taking control of your own fund

What are the risks?

	Trustees are ultimately accountable for all aspects of the management of the fund.   Penalties for non-compliance can be significant and in severe cases can include tax penalties, significant fines and jail terms
	Potential benefits of investing in a SMSF may not cover the establishment and administrative costs plus the administrative workload
	Compared to a retail or industry superannuation fund an appropriate level of diversification may be more difficult to achieve in a SMSF
	The fund may be affected by changes in superannuation rules from time to time

What are the costs of running a SMSF?

The costs and administrative requirements in establishing and running a SMSF include:

	establishment costs
	preparing and keeping accurate accounting and administrative records
	appointing an auditor and ensuring an annual audit is conducted
	lodging the annual return and paying the $150 supervisory levy
	accounting service costs
	possible costs of financial planning services

You should compare the costs of running a SMSF with the costs of other options such as leaving your benefits with your current fund.

ASIC and the ATO both consider that in order to make the costs of running a SMSF worthwhile the members should have at least $200,000.

More information about SMSF can be found at:

www.ato.gov.au/super

www.fido.gov.au and select About Financial Products>Superannuation

Published : August 2009