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  • Is establishing an SMSF right for you?

    The Australian Securities and Investments Commission (ASIC) have completed their review into the quality of advice in setting up and running a self-managed superannuation fund (SMSF). The reportExternal Link identifies a number of practical tips that advice providers can use to improve the quality of SMSF advice provided to individuals.

    The report also identified that a small proportion of newly established SMSF trustees do not properly understand what it means to set up and run an SMSF, and that an SMSF is not for everyone.

    Running an SMSF comes with many obligations and responsibilities, and requires you to have the both the time and skills to manage the SMSF in order to have a financially successful outcome. As a trustee of the SMSF, you'll be responsible for operating your fund within the law. If you don't manage your SMSF within the law, you may face penalties and your fund may suffer tax consequences. While we understand that mistakes happen and we will work with trustees to get their SMSF back on track, we do take regulation of the SMSF sector seriously and will take appropriate compliance action where warranted.

    You'll be responsible for the investment decisions of the SMSF, including formulating an investment strategy that should be reviewed regularly. You'll need to understand the restrictions on the investments an SMSF can make, for example, that your SMSF cannot purchase a property for you or a member of your family to live in.

    There are set-up and ongoing costs when running an SMSF. For every year that the SMSF is operating you will need to pay for an independent audit and the supervisory levy.

    You are also likely to have costs associated with:

    • preparing the SMSF annual return
    • valuations of the SMSF's assets
    • for some SMSFs, actuarial certificates for paying superannuation income streams (pensions)
    • financial advice
    • legal fees, for example, if the trust deed needs to be amended
    • assistance with fund administration
    • insurance for members.

    When considering whether to set up an SMSF you should also consider:

    • compensation is not available to trustees where the SMSF make a loss due to fraud or theft
    • SMSFs members cannot take complaints to the Superannuation Complaints Tribunal
    • running an SMSF can be time consuming and requires a number of different skills
    • how your SMSF will be managed in respect of major life events such as marriage, divorce, and death.

    Our web content and online education courses can provide assistance to individuals thinking of setting up an SMSF. We will also work with you, as a trustee, to help you with your situation whether you want to wind up your SMSF or want to make a voluntary disclosure if you have contravened the superannuation laws.

    SMSFs are a great way to take control of your superannuation, but you should consider whether they suit your needs and skills first and will meet your retirement goals. You should strongly consider consulting an independent qualified, licensed professional before you make the decision to establish an SMSF.

    See also:

    To keep up to date with all the news and alerts for SMSF trustees and professionals, subscribe to SMSF News.

      Last modified: 28 Jun 2018QC 56133