Is an SMSF right for you?

Ask yourself these questions to help decide if a self-managed super fund is right for you

1. Do I have enough super?

 

You generally need a reasonable amount of super to justify the costs of an SMSF however there is no minimum balance required by law. The main considerations are comparing the costs incurred with those for industry or retail super funds, and ensuring that the balance, and any investment returns, are not absorbed by costs and fees. The fixed costs, (such as the administration fee and audit fee) when measured as a percentage of the balance, will reduce as the balance increases. An SMSF can pool the superannuation accounts of up to 4 members to increase the total SMSF balance.

SMSF balance*

Cost comparison with industry and retail funds

Less than $100,000

Unlikely to be competitive

$100,000 to $200,000

May be competitive provided administration and investment costs are minimised

$200,000 to $500,000

May be equally competitive

More than $500,000

May be more competitive

*This table is an estimate of the costs and is based on the Rice Warner report, ‘Costs of Operating SMSFs ASIC’ (updated on 3 September 2013, commissioned by ASIC). As it is an estimate, it is not a reliable indicator of the costs and fees that your SMSF may incur.

**The $100,000 minimum fund balance is merely a suggested guide based on the Rice Warner report, ‘Costs of Operating SMSFs ASIC’ (updated on 3 September 2013, commissioned by ASIC). The important consideration is to ensure that the start-up balance and any investment returns are not absorbed by costs and fees.

Generally an SMSF should not be considered until there is a balance of at least $100,000**

2. How much will an SMSF cost?

The costs will depend on how you choose to manage your SMSF and the investment strategy. The more complex you make it, the more it’s likely to cost. Administration costs are largely fixed whereas investments costs vary with the type of investments and the frequency of transactions. Also consider the net returns you’re expecting your SMSF to make (total return less costs to run).

In addition to administration costs and transaction costs, there is a set up fee and some ongoing regulatory charges.

As a general rule of thumb, if your expected annual costs are less than 2% of your super balance then an SMSF may be worthwhile

3. Do I have the time?

 

It will depend on what type of investor you are and how active you are when managing your SMSF investment portfolio.

As an SMSF trustee you'll need to:

  • monitor your investment strategy
  • research investment options
  • keep abreast of how your investments are performing and adapt your strategy
  • organise annual valuations (if required)
  • stay on top of your reporting obligations and make sure you meet important deadlines
  • keep up-to-date with changes to superannuation laws affecting your trustee responsibilities

While it might sound like a lot of effort, you can outsource many of these tasks to a professional provider and focus on the investing. It is important to understand that as the trustee of your SMSF you are responsible, and will be held accountable, for the compliance of your SMSF with the rules and regulations. You may delegate the duties, but not the responsibilities.

You will need to spend some time monitoring your SMSF but how much time you spend investing is up to you

4. Do I know about the sole purpose test?

The sole purpose test means that your SMSF and its assets are used solely to provide benefits to you and other members for their retirement.

For example, If you intend to use the investment property for your holidays, or hang the art piece in your home, you are likely to breach the sole purpose test.

You must only invest in things that will benefit members in retirement

5. Do I need someone to help me set up and run my SMSF?

You can set-up and run an SMSF by yourself, but most trustees engage an accountant or a professional SMSF manager (like us) to manage the bulk of the administration work.

We can also help you understand what an SMSF can and can't invest in - but we won't be able to recommend any specific investment strategies or financial products. If you need help with that please contact an AMP Adviser.

It is important to understand that as the trustee of your SMSF you are responsible, and will be held accountable, for the compliance of your SMSF with the rules and regulations. You may delegate the duties, but not the responsibilities.

You don't need a professional to manage your SMSF but most trustees do get some help

6. Am I eligible to become a trustee?

Anyone 18 years or over can be a trustee of an SMSF as long as they are not:

  • classified as an undischarged bankrupt.
  • mentally incapacitated.
  • charged with certain criminal convictions.
  • disqualified by a court or regulator (e.g. by ATO).

 

An individual under the age of 18 can be a member of an SMSF, but not a trustee.

7. Where can I run my SMSF from?

SMSF residency rules can be complex. Generally:

  • the SMSF must have been established in Australia
  • the central management and control must ordinarily be carried out by trustees residing in Australia
  • for the purposes of determining whether contributions can be made by non-Australian resident members, at least 50% of the value of the SMSF’s assets must be attributable to active members who are Australian residents, for the contribution to be able to be made.

If you are planning to leave Australia for more than two years you should seek professional advice.

If you plan on moving overseas permanently an SMSF is probably not right for you

What's next?

What is an SMSF?

Understand some key differences between an SMSF and traditional super

What is an SMSF?

Make sure an SMSF is right for you

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Information to help you decide if an SMSF is right for you

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Explore SMSF investments

Suggested next step

Once you’ve decided an SMSF might be right for you, explore investment types for your SMSF

Explore SMSF investing

The AMP SMSF Administration service

Once you understand SMSFs, start one with the AMP SMSF Administration service

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Still want to learn more about SMSFs?

Key things you need to know

Learn more about SMSFs to help you make the right decisions
 

Ask about permissible investments

Do you want to know if a specific investment is permissible for an SMSF?

Important information

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It’s important to consider your particular circumstances and read the relevant Financial Services Guide (including the Terms and Conditions) before deciding what’s right for you. This information hasn’t taken your circumstances into account. On this page ‘you' and ‘your’ means the trustee(s) of your SMSF. As a trustee of your SMSF you are ultimately responsible for your SMSF, including the investment decisions that you make for your SMSF. If you need assistance, please seek a financial adviser. Any tax information provided is general,  intended as a guide only, and based on our understanding of taxation laws current at date of publication. It is not a substitute for specialised taxation advice or an assessment of liabilities, obligations or entitlements that arise, or could arise, under tax law. We recommend consulting a registered tax agent / tax professional.  Consider the SMSF Administration Solutions Pty Ltd Financial Services Guides (including Terms and Conditions) for information about our services, fees, and the remuneration and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

The AMP SMSF Administration service is offered by SMSF Administration Solutions Pty Ltd ABN 76 097 695 988 AFSL 291195 trading as AMP SMSF Administration, an AMP Group Company.