Thinking about an SMSF? Here’s what you need to know

While you have total control over how your retirement funds are invested within the confines of the laws, many factors need to be considered first.

Before taking the plunge, weigh up the risks and rewards by understanding the various super and tax laws, check out the costs involved as well as the level of administration required and start considering your investment strategy.

What you need to know

Setting up an SMSF can be a complex and time-consuming process and there are quite a few regulations and rules that you need to be familiar with before setting up an SMSF. Therefore, seeking professional advice can be beneficial to get your SMSF off on the right foot so it qualifies for the tax concessions available through the super system. We can assist to ensure your SMSF is set up correctly in the first instance to ensure you are eligible for the tax concessions and it is easier to administer throughout the year.

The advantages of an SMSF

A SMSF offers several advantages, particularly for individuals who want more control over their retirement savings and investments. Some of the key pros of having an SMSF include:

• Investment control - SMSF members have complete control over their investments, you decide where to invest and when assets are disposed. You could also incorporate in property as part of your portfolio.
• Estate planning - SMSF members can set up binding death benefit nominations to specify how their superannuation will be distributed after they pass away. 
• Asset protection - SMSFs can protect members from bankruptcy and litigation, and their superannuation benefits are usually protected from creditors. 
• Diversification - An SMSF has greater access to investment options and a diversified SMSF portfolio could reduce risk and improve returns over time. Speaking to your accountant or financial adviser can help to ensure you are well-diversified. 
• Tax advantages - SMSFs have one of the lowest tax rates in Australia. Other tax credits can help to further reduce the tax rate. 
• Lower costs - Running your own SMSF can have lower ongoing costs, especially for larger funds. 
• Lump sum payments - SMSF can pay benefits as a lump sum, a pension or a combination if the payment is under the laws and the trust deed.

The disadvantages of an SMSF

While there are several benefits to having an SMSF, there are also some drawbacks and challenges. Here are some of the main things to consider:

• Responsibility and learning - Trustees must understand and comply with legal and financial requirements.
• Cost - SMSFs can be expensive to set up and maintain, especially for SMSFs with smaller balances. 
• Time and effort - Running an SMSF requires a significant amount of time, effort, and expertise. Engaging with your accountant or financial adviser for assistance and ongoing support can help to ease the burden.
• Risk - SMSFs are not guaranteed by the government, and investment returns are not guaranteed. If you lose money, you won’t have access to the government compensation scheme.

Is an SMSF right for you?

Setting up an SMSF is worth the time for those who want greater control over their retirement savings, however before you start, you need to consider whether you are comfortable taking on the responsibility of making investment decisions and if you will have the time to manage the ongoing administration tasks associated with it.

Get professional help

Establishing and running an SMSF is not something you can do easily without professional assistance. Many of the legal and regulatory requirements are complex and must be adhered to ensure the fund is compliant. These requirements are also regularly updated or changed so you’ll need to keep an eye on any new obligations.

Many trustees need help with the day-to-day running of the fund and to meet its ongoing reporting and administrative obligations.

If you are considering setting up an SMSF, give us a call. We can help you decide whether an SMSF is right for you and assist you with the set-up and administration of the fund if you decide to proceed.



The information in this article does not take into account your objectives, needs and circumstances. We recommend that you obtain investment and taxation advice specific to your investment objectives, financial situation and particular needs before making any investment decision or acting on any of the information contained in this document. Subject to law, Capstone Financial Planning nor their directors, employees or authorised representatives gives any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of the information contained in this document. Principal Wealth Management Pty Ltd trading as BMO Financial Solutions ABN 53 109 336 601 is a Corporate Authorised Representative (CAR 277821) of Capstone Financial Planning Pty Ltd ABN 24 093 733 969 Australian Financial Services Licence (AFSL) No. 223135.