The Pros and Cons of Managing Your Own Superannuation

Sunny • September 21, 2017

In simple terms, a self-managed superannuation fund (SMSF) is different to regular super funds because it is run by you.

Close to 600,000 SMSFs are now active in Australia, according to statistics released by the Australian Taxation Office. Statistics also show the average balance of a SMSF now exceeds $1 million, with the ‘average’ fund balance now around $1,050,000.

A SMSF will give you more control over your super and retirement planning, but it’s not a decision to be taken lightly as it carries responsibilities. So, is a SMSF right for you? Let’s take a look at the pros and cons.

Pros

Complete control
One of the biggest benefits of having a SMSF is control. Considering superannuation is the second biggest asset behind the family home, running an SMSF gives you greater control over your choices in the financial space.

Investment choice
Did you know SMSFs provide more investment options than any other super fund? Trustees can access direct shares, high-yielding cash accounts, term deposits, income investments, direct property, unlisted assets, international markets, collectables and more.

Tax benefits
SMSFs come with tax concessions dependent on your personal circumstances and investment strategy. In the accumulation phase, tax on investment income is capped at 15% and in the pension phase, there is no tax payable.

Cost effective
SMSFs with balances above $200,000 or so, may have lower fees than many industry super funds.

Consider consolidation
A SMSF allows up to three other members, including a partner, spouse or other family members. Consolidating allows for the creation of a bigger balance, which increases investment opportunities.

Cons

Time-consuming
Managing your SMSF involves significant time and effort. You need to invest the time in complying with trustee responsibilities, as failure to do so can result in serious consequences.

High cost
The Australian Securities & Investments Commission (ASIC) suggests the costs of establishing and operating an SMSF with a balance of $200,000 or less is unlikely to be competitive compared to a large super fund.

Harsh penalties
As trustee, you are responsible for keeping records and meeting other requirements. Failure to comply with superannuation laws have severe consequences. The Tax Office, as the regulator of SMSFs, has the power remove a fund’s complying status.

Investment knowledge
Are you aware of all the legalities involved when it comes to SMSFs? Do you understand the different investment markets? Do you know the tax implications? Ideally, SMSF members should have a more in-depth understanding of at least the basics of sound investment practices than members of big funds.

If you’re thinking about setting up your own SMSF, you need to do be committed. As the administrator of a SMSF, you have legally binding responsibilities.  The viability of a SMSF varies greatly depending on how much money you have, what other investments you have and what your overall goal is for your retirement.

 

At BDH Leaders, we advise you on the best fit for your SMSF. View more information on our SMSF service here .

ATO take “Gloves off” on overseas income

By Editorial Team • September 6, 2019
How you are taxed and what you are taxed on depends on your residency status for tax purposes. As tax residency can be different to your general residency status it’s important to seek clarification. The residency tests don’t necessarily work on ‘common sense.’ For tax purposes: Australian resident – taxed on worldwide income including money earned overseas (such as employment […] The post ATO take “Gloves off” on overseas income appeared first on BDH Leaders.

Tax Time: Are you in the ATO’s sights?

By Editorial Team • June 16, 2019
What’s new Live reporting through Single touch payroll Single touch payroll (STP) reporting has changed the way businesses report salary and wages, PAYG withholding and superannuation contribution information to the ATO. For the 2018-19 financial year, only businesses with 20 or more employees were required to use STP. From 1 July 2019, all businesses will need to use STP although […] The post Tax Time: Are you in the ATO’s sights? appeared first on BDH Leaders.

What you can expect after the Election

By Editorial Team • May 3, 2019
Budget 2019-20: The pre-election announcements that are now law The Federal Budget announced a series of measures, some of which were legislated before the election was called. Extension and increase to the instant asset write-off The popular instant asset write-off for small business has been extended and increased. The new laws: increase the threshold below which small business entities can […] The post What you can expect after the Election appeared first on BDH Leaders.

Borrowing in the post Banking Royal Commission era

By Editorial Team • December 17, 2018
The fallout from the Banking Royal Commission is reverberating across the economy. Banks are simplifying their business models, cutting costs and tightening their lending practices. Boards are streamlining their product offerings in the wake of some pretty astounding findings by the Commission. The impact of the Banking Royal Commission is not only being felt by banks. The property markets continue […] The post Borrowing in the post Banking Royal Commission era appeared first on BDH Leaders.

Is a Limited Recourse Borrowing Arrangement right for my SMSF?

By Editorial Team • December 17, 2018
We borrow all the time to acquire assets; you may borrow to purchase a home or investment property which usually involves a mortgage, you may borrow from a finance company for a car which uses the car as collateral, you may take out a margin loan to purchase equities. These are just some examples but there is another: Limited Recourse […] The post Is a Limited Recourse Borrowing Arrangement right for my SMSF? appeared first on BDH Leaders.

Building wealth with stocks, bonds and funds

By Editorial Team • August 21, 2018
Investing in revenue-producing assets can be confusing. There is a lot of financial jargon to wade through and it’s often not easy to decide which asset best suits your needs and financial goals. In this article we will simplify stocks, bonds and funds. Stocks Stock (equity) is when you purchase shares in a company. The price of a share, purchased […] The post Building wealth with stocks, bonds and funds appeared first on BDH Leaders.

The rise and rise of investing ethically

By Editorial Team • August 21, 2018
Making an investment decision is not always based on the possible return you may receive from that investment. An increasing number of people are basing their choice of fund, or company, on issues around social responsibility, sustainability and corporate governance. In Australia, ethical investing started in earnest in 1986 with the launch of Australian Ethical, followed in 1994 by Hunter […] The post The rise and rise of investing ethically appeared first on BDH Leaders.

Let me be Frank

By Editorial Team • August 21, 2018
What is a Franking Credit? You have probably seen this phrase on tax statements provided to you by a company you invest in but what does it actually mean? Franking Credits are the means whereby Australian companies can give credit for tax paid at the company level to their shareholders, which can then be used by the shareholder to avoid […] The post Let me be Frank appeared first on BDH Leaders.

IPOs vs ICOs – what’s right for you?

By Editorial Team • August 21, 2018
There are significant differences between an initial public offering (IPO) and an initial coin offering (ICO) and before you invest in either option, it is important to understand those differences and the risks associated with each. What is an IPO An IPO is the first sale of a company’s stock issued to the public via a stock exchange, usually to […] The post IPOs vs ICOs – what’s right for you? appeared first on BDH Leaders.

Is your business about to have a growth spurt (and are you ready)?

By Editorial Team • August 21, 2018
Besides the launch phase, growth spurts are the second riskiest time for many businesses. An unexpectedly successful marketing campaign, a sudden change in consumer needs, a ‘hot’ market for a particular type of product or service – any of these things can cause challenges for your business. The question is – will your business cope?   Consider the following points […] The post Is your business about to have a growth spurt (and are you ready)? appeared first on BDH Leaders.
More Posts