Have enough assets, time and skills to run your own fund
Consider the amount of time, money and skill you will need to devote to running your own super fund and whether it is worth your while. Operating an SMSF means you are responsible for the fund. If you fail to perform your duties according to the law you may face severe penalties and your fund may suffer serious tax consequences.
You need to make sure you have enough assets, time and appropriate skills to:
- make the best investment decisions
- meet all your obligations as a trustee of your fund.
As a trustee of an SMSF, your primary responsibility is to make sure you have invested your fund's money appropriately, so ask yourself the following questions:
- Am I a confident and knowledgeable investor?
- Will an SMSF do as well as, or better than, other super funds after I pay all the costs?
If you are not confident you can get a better result, you may be better off leaving your super in a fund which is professionally managed.
You need to make sure you have enough super savings to make your fund viable. The costs of establishing and running a fund can vary significantly but as a general guide, to be competitive with an APRA-regulated fund, you will need around $200,000.
To be legally established, your fund needs to hold assets so you will need to make sure you are in a position to contribute or transfer assets into your fund in a timely manner.
You should get advice about your circumstances, including the proposed number of members and how you plan to run the fund. It will also cost around $2,000 to run a medium-sized fund each year. However, it can often cost more depending on the cost of the professional accounting services you use, together with the cost of financial, tax, audit, investment and legal advice you obtain to run the fund.
All SMSFs are subject to an annual supervisory levy designed to fund the regulatory costs of making sure funds comply with their super obligations. The amount payable is included in the SMSF annual return for the relevant financial year. The levy is subject to change. Some costs, including the audit fee and supervisory levy, will be incurred on an annual basis regardless of the assets held in the fund.
You need to consider if you and the other members have adequate insurance in case of death or inability to work because of an illness or accident. Most APRA-regulated super funds offer insurance benefits up to a certain level if you die or are unable to work because of an illness or accident. They can provide this insurance at a low cost because they can buy group policies. You may need to consider any additional costs for insurance when comparing the benefits of an SMSF with your existing fund.
Super laws allow for the provision of financial assistance to be granted to APRA-regulated funds that suffer losses as a result of fraudulent conduct or theft. Under existing super laws there is no government or industry compensation available for members of super funds operating outside the regulation of APRA.
However, you do have certain rights and options available should your fund suffer a financial loss due to fraudulent conduct or theft. Legal options are available under corporations law if you received advice or services from an Australian financial services licensee who was involved in the fraudulent conduct or theft. You should seek legal advice about taking action against a person who engaged in fraudulent conduct. You may also approach the Financial Ombudsman Service (FOS) if the trustee's adviser, or other service provider involved in the fraudulent conduct, is a member of FOS.
If you want your super to be covered by the financial assistance program, you can choose to join an APRA-regulated fund or appoint a registrable super entity licensee as trustee (that is, become a small APRA fund).
You should also understand that you cannot seek resolution of SMSF disputes via the Superannuation Complaints Tribunal (SCT).
You will need to:
- be aware of the requirements of being an SMSF trustee
- understand the level of protections available for SMSF members
- devote time to running your own super fund (and you should consider if you are able to dedicate this time).
Sections within Thinking about an SMSF
Last Modified: Tuesday, 7 May 2013