What to consider when setting up an SMSF

Setting up a self managed super fund (SMSF) can be complicated. Not getting it right can materially affect your financial situation and retirement plans. But don’t stress, help is at hand!

The first question you need to be sure about is whether an SMSF is the right fit for you and your specific circumstances. We recommend seeking the advice of an SMSF Specialist such as East Partners. They can help you along the journey of setting up an SMSF and ensure setting up a fund is the right fit for you.

So, what else do you need to answer before you establish an SMSF?

Small balances

You might have heard in the media that you need $1 million before you can consider setting up an SMSF. However, we do not believe that this is the case. SMSFs can make sense and be cost effective from as little as $200,000 with the appropriate fixed fees. It is therefore important you ensure you have an appropriate superannuation balance because low balance SMSFs may not be in your best interests. This is because SMSFs tend to be more cost efficient with larger balances.

For what purpose?

Why do you want to set up an SMSF? Make sure you are considering a fund for the right reasons and that it suits your specific circumstances. The most common motivation SMSF trustees indicate as a reason for setting up a fund is for the control it offers. Control of an SMSF allows you to have a wide range of investment choice, flexibility and engagement with your superannuation.

However, superannuation law is complex and you need to ensure your ambitions are allowed by the regulations and will be able to be achieved within an SMSF. SMSF does stand for ‘self managed super fund’, but it doesn’t mean you have to go it alone, you should enlist the advice and services of an SMSF Specialist – as much or as little as you need their input.

Cost/Benefit

SMSFs incur a wide range of costs in establishment and the day-to-day running of the fund. We recommend doing an estimate of the initial SMSF establishment and advice costs including preparation of the Trust Deed, ATO application forms, provision of binding death nomination forms, investment strategy and general trust and legal advice. We recommend speaking with an SMSF Specialist to gain an estimate of these costs so nothing comes as a surprise. You should also understand other costs, which unlike large super funds generally occur with fixed rates rather than as a proportion of your balance. These include:

  • The annual SMSF supervisory levy collected by the ATO,
  • The cost of producing an annual financial statement, tax return and Transfer Balance Account Reporting (TBAR), and
  • Annual, independent audit fees.

The day-to-day running of an SMSF requires your dedicated attention to manage effectively. Understanding from the outset your legislated responsibilities and obligations before establishing a fund is important.

Seek help from a specialist

SMSF does stand for self managed superannuation fund but you don’t have to do it alone. Assistance from an appropriately qualified SMSF Specialist such as Chris East from East Partners ensures you are making the most appropriate choices for your specific circumstances.

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