Myths about Self Managed Super Funds (SMSF)
This post is a guest blog by ESUPERFUND.
A crash course in SMSFs myth-busting (our favourite kind of myth-busting)
At some point, there must have been some truth to these myths. After all, they’ve made it this far. And sure, perhaps at some point, someone out there decided to put themselves before their members and give us all a bad wrap.
But shine a little light on these old favourites and you might be surprised by how little of these myths is still true today.
So grab your torch (or maybe just your patience for unfortunate metaphors) and let the SMSF myth debunking begin…
SMSF starting balances
Much of the debate surrounding what is or isn’t a viable starting balance for your Self-Managed Super Fund (SMSF) relies on the outdated notion of SMSFs charging higher fees than APRA-regulated superannuation funds.
In reality though, the Australian Securities and Investments Commission (ASIC) does not stipulate that there is a required minimum balance to begin a self-managed fund, although a large start-up amount is recommended.
Similarly, SMSF skeptics also cite hidden fees as a probable trap for would-be members, but we’ve debunked this one too. Good SMSF administrators will charge you an annual fixed fee. The fee should be the same irrespective of the number of transactions made by your SMSF, the size of your SMSF or the number of members in your Fund. This is our fee structure at ESUPERFUND.
SMSF structures and responsibilities
Another misconception about SMSFs is that SMSF owners aren’t required to meet the same legislative standards as other superannuation companies because ‘I’m managing the fund, so I can invest the money however I like’. So let’s be clear: there is absolutely no truth to this myth whatsoever.
What is true is that:
- SMSF trustees must take full responsibility for knowing, adhering to, and staying up to date with all current (and potential future changes) to all ATO-governed superannuation rules, restrictions and legislation. ‘I didn’t know’ won’t protect you. Neither will ‘but Google said it was okay’.
- The ‘you’ who earns and receives superannuation from an SMSF isn’t the same person – legally – as the ‘you’ who manages the SMSF fund. In the eyes of the law, you’re two separate people: Member and Trustee. And as a trustee you need to act in the best interests of your member, by remembering that what you’re legally able to do as a member is not the same as what you can or can’t do as a trustee.
SMSF super access
Investing your superannuation in an SMSF does not mean that you can access your super any sooner. Nor does it mean that you can use the money accumulated in your SMSF to buy your house and stop paying your mortgage, ‘invest’ in your children’s or grandchildren’s education, or treat yourself to that gun metal DB4GT you’ve always wanted ‘because classic cars…appreciate…right?’.
SMSF members are able to access their superannuation at precisely the same moment as their non-SMSF equivalents. For most people, that’s after you turn 65 or when you’re fully retired and have reached your preservation age.
And while, as an SMSF trustee, you have the power to build a portfolio based on your own unique investment preferences and needs, even James Bond couldn’t use an SMSF to upgrade his Aston Martin.
The term ‘DIY super’ is often associated with SMSFs and, understandably, the term is occasionally enough to deter would-be investors. ‘DIY’ sounds flimsy. Like something you might tinker with on weekends, before the family arrives for a barbeque.
But having an SMSF doesn’t mean you’re on your own. In fact, having a good support network of advisors is important. And what’s more, you can decide what that network looks like. Find an accountant, solicitor, and financial planner you like and trust and talk to them. Keep them in the loop. Be transparent and encourage them to give you their honest opinion on whatever you’ve got planned for your SMSF. They can also help ensure that you’re up-to-date and complying with the SMSF rules and legislation relevant to your individual situation. They’re there to help you make the most out of your SMSF.
And so are we.
So if you need help setting up or administering your SMSF, talk to ESUPERFUND today.