Many Australians choose to invest in Self-Managed Super Funds (SMSFs) for increased control, flexibility and transparency of their investments for retirement. There are many considerations to make when looking to open a SMSF to determine if they are the right choice for you.
1. Are you eligible to become a trustee?
If you are over 18 years old, you are eligible to be a trustee, as long as you are not classified as bankrupt, mentally incapacitated, charged with certain criminal convictions, or disqualified by a court or regulator such as the Australian Tax Office (ATO). If you are under 18, you are eligible to be a member of a SMSF but not a trustee.
2. Do you have an appropriate balance to operate a SMSF?
While there is no minimum balance required by law, you need to have an appropriate amount to invest when you open a SMSF to make it valuable You need to ensure that costs and fees do not absorb any investment returns. There are many costs associated with a SMSF, including establishment costs as well as ongoing tax returns, audits, and fees.
3. Do you have the time?
A SMSF takes a considerable amount of time, especially compared to a regular superannuation fund. With a SMSF you need to:
- Research investment options
- Monitor investment strategy
- Be proactive with your investment strategy to continually adapt your plan when needed
- Make sure you meet reporting deadlines
- Keep up to date with superannuation laws and regulations that will affect your fund and your responsibilities
If you fail to comply with rules, you could face personal financial penalties or disqualification as a trustee. It is important to note that many trustees outsource administrative responsibilities to an accountant or SMSF expert. Ultimately, however, you are responsible for the operation and compliance of your SMSF and will be the one held accountable.
4. Do you plan on living overseas for an extended period?
Complex residency rules are in place for SMSF. A SMSF must be established in Australia, with management and control being carried out by trustees that reside in Australia. If you are planning to live overseas for more than two years, you will need to seek professional advice to ensure that you comply with the ATO and do not incur heavy penalties for non-compliance.
If you are unsure if a SMSF is right for you, the team at The Farm Protectors can provide you with guidance to make sure your investment will be worthwhile.