Is a self-managed super fund right for me?

We look at the key issues to consider if you’re thinking about a self-managed super fund.

Using a self-managed super fund (SMSF) may suit some people as a way of saving for retirement but it’s not the right choice for everyone.

A key point of difference between ‘regular super funds’ and a self-managed super fund is that each member of a self-managed super fund is also a trustee.

That means you wear all the responsibility for the operations of your SMSF including complying with the super and tax laws and making the investment decisions. The thing is, you may not have as much investment choice as you believe. There are strict rules governing the running of self-managed super funds, and breaking the rules could see you personally slugged with fines (up to $10,000 for each penalty), your fund could lose its ‘tax-friendly’ status and the ATO can impose other courses of action.

Along with control, some people see a self-managed super fund as a way of lowering the costs they pay on super. It’s always sensible to explore ways to make your super more cost-effective, but SMSFs also come with expenses which you need to consider.

It can cost from $916 to $2,035 just to establish your SMSF with a corporate trustee. When you take into account costs for compliance, administration, accounting and auditing, your self-managed super fund could cost anywhere from $1,171 to $8,157 annually for a SMSF that only has accumulation benefits.1 The costs fluctuate depending on the size of the fund and the amount of work you do yourself.

So is a self-managed super fund right for you?

If you plan to do some of the administration and investment work yourself, Rice Warner estimate you’ll need to have at least $200,000 in your SMSF to enjoy the same value as a regular super fund. If you plan to outsource these tasks you’ll need closer to $500,000 for your SMSF to provide the same value as an industry or retail super fund.2

Think too about whether you have the time and skills to manage your superannuation savings - not just now but also when you retire.

Bear in mind, there are super options available that combine the best of both worlds – low fees plus a choice of investments includINGly held shares. It’s an alternative worth exploring before you take the plunge into a self-managed super fund.

1Source: Rice Warner Cost of Operating SMSFs, May 2013
2Source: Rice Warner Cost of Operating SMSFs, May 2013