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Is an SMSF right for you?

Before you set up an SMSF, it's important to consider whether running your own super fund is right for you.

  • Do you have enough time, knowledge and skills to manage your own super and meet your legal and other obligations?
  • Do you need the additional benefits an SMSF can provide?
  • Do you and your co-trustees have enough combined super to make an SMSF cost-effective, which is generally upwards of $350,000?

If you answered NO to any of these questions, you may want to consider other super options where you can outsource the responsibility for running the fund to superannuation experts.

You should consider seeking professional advice or guidance when deciding on the best superannuation solution for you. It is recommended that you also seek advice from a registered tax agent to determine the tax implications for you. NAB is not a registered tax agent and the tax information contained on this website should not be relied upon to determine your personal tax obligations.

Where can you get advice or guidance?

If you're not sure whether an SMSF is right for you, or would like some help setting up or running your fund, there are professionals who can provide advice or guidance. These include:

  • A financial or investment adviser, who can recommend whether an SMSF is right for you, and help you prepare, implement and review your fund's investment strategy
  • An accountant and/or registered tax agent, who can look after your fund's record keeping and reporting requirements, and provide taxation advice. Please note that an accountant cannot recommend you establish or wind up an SMSF unless he or she is licensed to provide financial advice in this area.
  • A fund administrator, who can help you establish and look after the day-to-day running of your fund, including tax and compliance obligations, and
  • An auditor, who must be appointed to sign off on your fund each year to the Regulator.
  • You may also consider engaging a specialist lawyer, who can provide you with an appropriate trust deed and governing rules for your fund, and advise you on other legal matters if your situation is complex.

Many SMSF trustees now use a professional SMSF administration service to establish their SMSF (including the trust deed and binding death benefit nominations), look after their fund's compliance and tax obligations and arrange their annual audit. This can be a cost effective way of ensuring all your obligations are met.  

Find out more about our SMSF Establishment Service, including trust deed preparation from Heffron SMSF Solutions.

The benefits and risks of running your own SMSF

SMSFs can offer a number of features and benefits generally not available with other super options, but there are also some risks associated with running your own fund.

Benefits

  • More investment control: You can establish your own investment strategy and directly control where and how your super is invested.
  • More investment choice: You can select from a wider range of investments including all listed shares, some unlisted shares, residential and business property, and collectables such as artwork, stamps and coins.
  • One fund for the family: You can set up a fund for yourself and up to three other people and consolidate your super balances. This could enable you to invest in assets of higher value than if you set up a fund with fewer members, achieve greater estate planning flexibility and reduce fund costs.
  • Borrow to make larger investments: Your SMSF could make a larger investment in assets such as shares and property by using cash in your fund and borrowing the rest.
  • Tax savings: Like other super funds, earnings from investments held in a complying SMSF are generally taxed at a rate of 15% while you build up your retirement savings, and 0% when the assets are used to pay a pension (under the Transfer Balance Cap, which will be $1.6m from 1 July 2017). When you access your super benefits, concessional tax rates are payable on lump sum withdrawals and pension payments if you are between your preservation age and 59, and no tax is payable on benefits received at age 60 or over (provided your super has come from a taxed source). 
  • With SMSFs you can also take greater control over the timing of tax events, such as starting a pension without triggering capital gains tax when your superannuation assets move into pension phase. You also have the option of transferring certain assets that you own into your SMSF and potentially minimising capital gains tax by claiming a deduction for a contribution. Find out more about strategies for maximising your super.
  • Greater estate planning certainty and flexibility: You can complete a binding death benefit nomination without having to meet some of the constraints that apply to other super arrangements, which can ensure your superannuation benefits go to your desired beneficiary on your death.

Risks

  • Fund requirements: There are strict legal obligations for running your own fund, and penalties apply if you don’t meet these requirements.
  • Time and money: It costs time and money to set up an SMSF, and deal with the day to day requirements of running your SMSF. There are also ongoing fees that you need to be aware of such as auditor fees and annual accounts and return preparation costs. If you engage the services of an administration provider then there may be additional administration costs as well.
  • Making investments: As a trustee, you determine which investments make up your fund. If you don’t have the right knowledge to make informed decisions, you could affect your retirement savings.
  • Regulatory changes: You need to be aware of any changes to the superannuation laws and make sure your fund is compliant.

Tailored solutions Setting up your SMSF

We're giving you the tools you need to get you started with your SMSF:

  • Great value establishment service.
  • Expert help in managing your SMSF.
  • Easy online application.