A self-managed superannuation fund (SMSF) will give you more control over your super and retirement planning, but it’s important to understand the responsibilities that come with being a trustee.
Here are a few things to consider before setting up an SMSF:
- Do you have enough supers?
- Do you have sufficient time to manage an SMSF?
- Will someone help you set up and run your SMSF?
- How much will an SMSF cost you?
- What is the sole purpose test?
- Are you eligible to become a trustee?
- Where will the fund be run from?
Do I have enough super?
- You need a reasonable amount of super—or be looking to build up your super quite quickly—to justify the costs of an SMSF.
- Everyone has a different view of how much is enough to start an SMSF. The Australian Taxation Office (ATO) has said that to have a viable fund, you may need a minimum of $200,000. A financial adviser can help you work out if you have enough.
Do you have enough time?
There are many tasks involved in managing an SMSF, so it helps to be prepared for the time commitment. As an SMSF trustee you'll need to:
- monitor your investment strategy
- stay on top of your reporting obligations and make sure you meet relevant deadlines
- keep up to date with changes to superannuation laws that could affect your responsibilities as a trustee
- stay abreast of investment opportunities and performance, and adapt your investment strategy.
Will someone help you set up and run your SMSF?
You need someone to help you set up your SMSF. An adviser, accountant or SMSF solutions manager can help you work out if an SMSF is right for you.
How much will an SMSF cost you?
The costs will depend on your circumstances, super balance, investment strategy and how you choose to manage your fund. The more complex you make it, the more it’s likely to cost.
What is the sole purpose test?
The sole purpose test is the central requirement for any super fund as set out in Australia’s superannuation laws.
In general terms, it requires that your super fund and its assets are used solely to provide benefits to you and other members during retirement.
Another way is to ensure it is designed to help dependents should you or they pass away or become permanently disabled.
To find out more about the sole purpose test, visit the ATO website.
Are you eligible to become a trustee?
Are any members insolvent or disqualified?
Individuals may not be eligible to be a trustee if they are:
- classified as an undischarged bankrupt
- mentally incapacitated
- charged with certain criminal convictions.
Age restrictions
An individual under the age of 18 can be a member of an SMSF, but not a trustee.
Where will the fund be run from?
SMSF residency rules can be complex. You should seek further advice if you or other members of the funding plan to live or travel frequently overseas. Generally:
- the SMSF must have been established in Australia
- the central management and control must ordinarily be carried out by trustees residing in Australia
- at least 50% of the SMSF’s assets must be held by Australian residents.
Important information
It’s important to consider your particular circumstances before deciding what’s right for you. This information hasn’t taken your circumstances into account.
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