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Blog

December 2nd, 2011

We’re hearing a lot about Self Managed Super Funds (SMSF’s) these days.  I don’t think a week goes by where I don’t come across something in a personal finance magazine or newspaper where there isn’t some mention of a SMSF. Generally the articles talk about all the ‘good bits’.  I agree there are heaps of advantages for SMSF’s.  In fact, I actually specialise in the area.  However, sometimes I think the ‘bad bits’ are glossed over.  I thought I might tell you a bit more about the ‘bad bits’.

You can set up your own private super fund and manage it yourself, but only under strict rules regulated by the Australian Taxation Office.

Running your own fund is complex so think carefully before setting one up. If you set up a self-managed super fund you must:

  • Carry out the role of trustee, which imposes important legal duties on you. As trustee you will be responsible for managing your SMSF according to its trust deed and the laws and rules that apply to SMSFs.
  • Use the money only to provide retirement benefits.
  • Set and follow an investment strategy that ensures the fund is likely to meet your retirement needs. You need to manage your fund’s investments in the best interests of fund members and in accordance with the law. You must keep your personal and business affairs separate from the SMSF assets.
  • Keep comprehensive records.   For example, you will need to arrange an annual audit of your fund, keep appropriate records and report on the fund’s operations and arrange an annual audit by a qualified auditor.  

If you’re running a self-managed super fund, you will typically need:

  • A large amount of money in the fund to make set-up and yearly running costs worthwhile (around $250,000)
  • To allow for ongoing expenses such as professional accounting, tax, audit and legal advice
  • Plenty of time to manage the fund
  • Financial experience and skills so you are more likely to make sound investment decisions 

Clearly, setting up and running a SMSF is a major financial decision.  You need to have the time and skills to do it. There may be better options for your superannuation savings. Either way you should certainly get professional advice.

As an aside, if you enjoyed my blog, why don’t you check out some more of my insights at Dan’s Corner by clicking on this link .

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