A Self-Managed Superannuation Fund is a private superannuation fund regulated by the Australian Taxation Office that you manage yourself.

Setting up an SMSF means you are in control of how to invest and grow your superannuation balance. For some, this is a scary thought, for others its just what they are after.

Here are some of the pros and cons of SMSF’s:

Pro’s

Con’s
Control over Investments – as a trustee of a SMSF you have complete control over how you want to invest your superfund balanceGreater Responsibility – all decisions associated with running the SMSF are yours. Including, keeping up to date with legislative requirements, changes to rules and regulations. Breaches can incur penalties.
Flexibility – as you are in control of your investments, you can modify these investments at any time you see fitDiversity – although you have greater flexibility, you may not have enough cash available to diversify your risk by investing in different asset classes.
Control over Operations – generally when it comes to getting the most out of your superannuation balance an SMSF if easier to commence pensions, allocating contributions and paying out benefitsIt can be expensive – depending on the types of investments or the administration/advice you require it may be expensive to maintain the SMSF on an ongoing basis.
SMSF can live on without you – an SMSF can continue to exist without you and act as an income stream to your spouse or even children.Highly regulated – The fund needs to be audited each year. Any breaches are notified to the ATO. Breaches can incur penalties. As trustee of the SMSF you need to ensure all minutes from meeting are documented, you have an update to date investment strategies, a plan for your retirement, annual tax return is lodged and paid on time.
Tax Concessions – small businesses often find SMSF have the most benefit to gain. Small businesses can utilise capital gains tax concessions by contributing proceeds from the sale of assets into their SMSF (reducing tax paid in the hands of the business).
Ability to borrow – SMSF’s can borrow to purchase property. Usually commercial property is more advantageous than residential property. Businesses can sell across their commercial property into their SMSF’s and essential pay ‘themselves’ rent into retirement.

 

SMSF may not be suited to your circumstances and needs. Before making any financial decisions it’s important to carefully consider all the pros and cons. For more information, contact enquiry@pjtaccountants.com.au or your financial planner.