By Navigate Financial Group, Director & Planner, Tony Borg

A self-managed super fund – or SMSF as they are more frequently called – are becoming one of the most popular tools on the average Australian’s financial tool belt. Putting you directly in control when investing for your retirement, it is easy to see why so many people are opting to start their own SMSF. In fact, by June 2014 there were over 530,000 SMSFs in Australia, with a little over 1 million active members of these funds. With roughly 1 in 20 of us participating, then, we are sure that you’ve considered it too. But before you pool in your money and bet everything you have on this seemingly unstoppable horse, let’s see if it’s right for you.

Your SMSF and You

Now, for many people an SMSF is an excellent option. Not only can it be a financially profitable move, but a personally satisfying one as well, putting you directly in the driver’s seat when making all investment decisions. What’s more, you also get the chance to benefit from unique tax avenues and the access to insider-only investment opportunities, something that on the surface naturally sounds rather glamourous.

Despite all of these attractive bonuses, however, like any good business decision it’s important you do your homework; SMSFs offers many benefits, but you have to work to work hard to reap them. This prospect is something that one should not take lightly, especially regarding the complicated and often-times overwhelming net of legal obligations concerning all legal and financial aspects of your fund.

So before you jump in, ask yourself these 3 questions.

Can I afford it?

At this juncture you might be thinking, “of course, after I set up my SMSF I can!” Unfortunately, it does require a certain amount of investment in the first place, and you should expect to pay around $2,000 a year to operate a medium-sized fund. Therefore, if you are new to the game and only have around $10,000 in savings that you wish to devote to your SMSF, that could very much disappear in only a few years. On the other side of the coin, for those of you who have built up a more substantial nest egg – somewhere in the neighbourhood of between $200,000 and $300,000 – it may make more sense to invest.

Do I Possess the Skills and the Know-How?

The answer to this question will most likely be no, and even if you consider yourself relatively caught up in this area you should never assume that you don’t need professional guidance. In fact, thousands of penalties are issued by the ATO every year to people who do not professionally administer their SMSF, with some penalties costing over $10,000 for seemingly minor discrepancies that amateur fund-holders can easily overlook. Therefore, if you are not 100% sure that you can commit the time and the effort it will take to maintain your account speak to a financial advisor and find out as much as you can about professional administration options. This area is incredibly complex and can be a confusing minefield for those without experience, so let your financial planner provide you with suitable advice.

Is my investment portfolio too bland, and will I be able to make it more diverse?

The foresight to diversity is one aspect of the SMSF-fund administrator relationship that you have to take care of yourself, and one that’s incredibly important. Therefore, this is another arena within which you will benefit massively from professional, experienced and qualified financial coaching, as asset classes can fluctuate and perform variously over time. As long as you do your research, invest enough time in decision making and take appropriate professional counsel, though, even the most unimaginative of us can achieve ample diversification. A goal that will result in a much steadier and more profitable fund in the long-term.

Overall, a self-managed super-fund is a solid move for anyone who possesses three key factors: Time, money and know-how. If you can achieve all three – something professionals can provide –  An SMSF should let you take tighter control of your financial future and mould your circumstances precisely how you want them.

Categories: Insights