Pros an Cons of Self Managed Super Fund (SMSF)?

Pros and Cons of Self-Managed Super Funds (SMSFs)

A self-managed super fund (SMSF) can offer greater control and flexibility over retirement savings. However, it is important to understand the pros and cons before setting up an SMSF.

What is an SMSF?

An SMSF, or self-managed superannuation fund, is one of the three main types of super funds in Australia. Unlike industry and retail super funds, which have professional trustees, an SMSF must have fewer than seven members, and all members are also trustees. This means that the trustees are responsible for all investment decisions and compliance with superannuation rules.

Benefits of SMSFs

• Investment Flexibility: An SMSF can invest in almost anything, including shares, term deposits, rental properties, commercial properties, private equity, and artwork. This allows for greater investment options and potential returns.
• Administrative Flexibility and Control: With an SMSF, the trustees have control over the day-to-day operations and activities, which means faster decision-making and the ability to react quickly to opportunities and legislative changes.
• Borrowing Options: Unlike other superannuation funds, an SMSF allows borrowing to invest in assets such as property and shares through limited recourse borrowing arrangements.
• Estate Planning: An SMSF provides more control and certainty over who receives the super in the event of death, allowing for specific assets to be retained within the family.

Drawbacks of SMSFs

• Increased Paperwork and Legal Responsibilities: Running an SMSF requires more paperwork and legal responsibilities compared to industry and retail super funds.
• Higher Costs: Setting up an SMSF can cost around $2,000 to $3,000, with ongoing maintenance costs. However, for larger balances, an SMSF can be cheaper than retail and industry funds.

Overall, while SMSFs offer investment flexibility and control, they come with additional responsibilities and costs. It is important to carefully consider these factors and seek professional advice before setting up an SMSF.