A Self Managed Super Fund (SMSF) is a private superannuation fund, regulated by the Australian Taxation Office (ATO), that you manage yourself. SMSFs can have up to four members. All members must be trustees (or directors, if there is a corporate trustee) and are responsible for decisions made about the fund and compliance with relevant laws.
More than 1 million people in Australia have their own SMSF. 70% of SMSFs have two members (usually a couple), while 23% have only one member. So is a SMSF a good way to go?
A SMSF may not be for you if:
- you're disorganised with your paperwork
- you don't enjoy or lack the time to actively manage your finances
- you don't know much about the world of investing
Are SMSF just for the wealthy?
While the average fund balance is just over $1 million, more than 70 per cent of SMSF members have a taxable income of less than $100,000. So a large income is not necessarily a restriction.
Do they perform as well as industry super funds?
As they are self-managed, the success of a fund will, of course, vary from person to person. But according to the Productivity Commission's recent report, smaller SMSFs with less than $1 million in assets perform significantly worse than institutional funds.
But aren't SMSF's a good way to buy property?
Australians love property and a SMSF can be a way to use your super to invest in the property market. But you may want to consider whether tying up your cash in this potentially risky market is a good way to go, especially if you are close to retirement age.
My financial adviser is nudging me to create a SMSF
More recently, ‘full service’ financial planning firms began recommending Self-Managed Super Funds (SMSF) to customers who might be better off in a high performing industry super fund.
Why? Because when you switch to a SMSF, these firms collect fees on financial planning, accounting, insurance broking, mortgage broking and property sales commissions. Good for the firm, not necessarily the customer!
While this may not be the case for your financial adviser, it is worth asking what's in it for them if you do go down this route. And if you have doubts, consider getting a second opinion.
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General advice disclaimer
This is general information only and does not take into account your personal objectives, financial situation or needs. You should assess whether the information is appropriate for you having regard to your objectives, financial situation and needs and consider obtaining independent professional advice before making an investment decision. If information relates to a specific financial product you should obtain a copy of the product disclosure statement for that product and consider that statement before make a decision whether to acquire the product.