A self managed superannuated fund is a form of retirement savings. It differs from other super funds in that the members of the fund are also its trustees. This type of retirement fund is also sometimes referred to as a DIY fund because the trustee is entirely responsible for managing the fund. If you’re considering a retail super funds, consider the following pros and cons.
Pros
One of the main advantages of Self Managed Super Funds is that you, the trustee, have told control over the asset allocations. You are not subject to the decisions or the schedule of a fund manager. When you are ready to buy or sell, you can do so immediately without having to wait for a someone else to take action.
In addition, there is a high degree of flexibility in investment options for a self managed super fund. Many people choose them in order to purchase property within the trust. Any personal asset, like artwork or jewelry, can be placed in the trust.
There are several advantages to holding a business premises or other property in a self-managed super fund. In the case of a commercial premises, the business pays rent to the super fund and the fund pays only a low tax on the rent. In addition, the property is protected in case of bankruptcy.
One more benefit of a self managed super fund is the opportunity to make a larger investment by pooling with other members.
Cons
A disadvantage of a self managed super fund is the cost. You can expect about $2,000 in annual fees. Consequently, it is not worth investing less than $200,000. If you are only willing or able to make a small investment, an SMSF is not the best choice.
Another disadvantage is the amount of time you will need to spend to manage the fund. You’ll need to do research and stay up to date on investment strategies, and you’ll need to take care of all the administrative details. These include drawing up the trust deed, which establishes the powers of the trustees, benefit payments, and exit strategies; creating a dedicated bank account; managing all the paperwork, including annual statements; and arranging for an annual audit of the fund.
Failing to comply with tax regulations can carry very heavy penalties. Once the Tax Office removes a fund’s complying status, the fund will be taxed at the highest rate.