SMSFs or Self Managed Superannuation Funds are a bit of a buzz word at the moment.   Given that there are almost 500,000 SMSF’s in Australia that have more than $400billion in assets, you can understand why.  Current growth will see about 90 new funds set up every single day or about 30,000 new funds per year but we’ll also see about 4,700 SMSFs wound up each year as well.

To understand how a SMSF works, it’s imperative to understand how super is supposed to work.  Superannuation was designed to be a tax system that would allow ordinary Australians to save for their retirement.  Ultimate responsibility for the money and the underlying investments rests with the members and the amount of tax that you pay on funds inside super are capped at a maximum of 15% – it’s not a stretch of the imagination to see that paying 15% or less in tax is almost always going to be better.

Where people have become frustrated with the current system is no so much with super itself – but more so how it has been applied by the big financial institutions that now dominate the superannuation industry.  Few members feel like they have any say in how their funds are invested and it’s often heard that “if I could invest the money myself, I’d do a much better job at it”.   This has lead to Self Managed Super Funds – or SMSFs becoming more and more popular.  With a SMSF, the members are the trustees and the trustees are directly responsible for the investments of the fund.  Due to this direct relationship between the members and their money, it’s more likely that members of a SMSF are likely to invest into more direct assets such as property and shares rather than set and forget managed funds.


For every 6 funds that are set up, there is one that is shut down – why would that be?  Obviously, the members of the fund have come to the realisation that running a SMSF was not for them.  So, when will you know if running your own super is the right way to move?


There are a few key reasons why you would consider setting up your own Self Managed Superannuation Fund.  While not a comprehensive list, hopefully it will get you thinking in the right direction.


  1. You’ve got a large balance in your superannuation, especially if you include your partner’s super balance.  Because of the nature of SMSFs, often they main fees such as accounting, audit and administration are flat fee.  This means as the balance grows the percentage you’re paying in fees is constantly falling – often dropping to below what you would be paying in either a retail or even an industry fund.
  2. The cost of running a SMSF is similar in total fees to what you’re paying at the moment, and you would prefer to have more control over your superannuation assets
  3. Even if you’re paying more fees in a SMSF, you may want to consider one if you’re considering investing into a type of asset or a style of investing that is not actually available with a retail or industry superannuation fund.  This may include things such as borrowing money to invest, buying property or other non-listed assets such as gems and wine.
  4. You have ZERO faith in the current superannuation system and don’t feel that anyone else can manage your money as well as you.  In this case, you’re very unlikely to ever want to put any money at all, yet alone any additional money into superannuation – this could be detrimental to you.  By having complete control over all the funds in your SMSF, this may allow you to finally be comfortable with using superannuation as a tool to create wealth.


So, you’ve read the above and now feel that you meet one of the four criteria to set up a SMSF.  What is it that you should know to ensure that you are still making an informed decision?


Options on Trustees

Every superannuation fund has to have a trustee, and Self Managed Superannuation Funds are no different.  You can either be the trustee yourself, or you can elect to have a company which you own and are a director of act as the trustee.  There are pros and cons of each, and it depends on your personal situation.  We suggest that you seek the advice of a financial planner or accountant to work this one out.


Borrowing Money inside your SMSF

Superannuation funds can’t borrow money however there is now a specified method for allowing borrowings inside a SMSF.  The SIS Act governs how this can work, so we recommend you refer either to the Act or a professional adviser to ascertain if you are eligible to borrow money with your super or not.


SMSF Setup Costs

In order to set up a SMSF, you’ll need a trustee and a trust deed.  Cost will also depend on if you or a company is going to go as the trustee.  If you have a company as a trustee, you’ll need to pay ASIC lodgement fees in order to register it.  The cost of a SMSF trust could range from $0 up to about $5,000.  You generally get what you pay for, however be careful you don’t pay too much.  You’ll find generally, most professionals will charge between $750 and $2,000 for the trust deed.


SMSF Ongoing Costs

We’ve seen special offers on the internet for as low as $700 per year to run the accounts of a fund and we’ve seen people paying upwards of $16,000 per year for the same thing.  Typically, you get what you pay for, up to a point.  You’ll find people charging the higher amounts of money may be due to them not having the efficient systems and processes to generate the annual returns on a SMSF as other firms, and will therefore not be able to deliver the same value.  You shouldn’t be paying any more than $5,000 a year and paying as little as $1,500-$2,500 per year will usually see you get something pretty good.


Get More Information on Setting Up a Self Managed Super Fund

This list barely scrapes the surface when considering if you should set up a Self Managed Superannuation Fund – and if you do what type of things you should be aware of.  As always, seek the services of a professional financial adviser who actually knows that they’re doing to ensure that you experience a smooth and simple retirement.  A Financial Spectrum financial planner in Sydney can help you to discover more about SMSFs and whether one could be right for your personal situation.  Our financial advisors can also assist you to set up a SMSF for a very competitive rate.

Contact a Sydney Financial Planner today on 1300 886 018



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One Response to “SMSF – Is a Self Managed Super Fund Right For You? How to Get Started”

  1. SMSF Auditor April 24, 2013 at 11:10 pm #

    Thank for providing useful information on smsf investment.