Three Questions You Should Ask Before Establishing a SMSF

Three Questions You Should Ask Before Establishing a SMSF

Three Questions You Should Ask Before Establishing a SMSF

There has been a lot of talk in the media about the growing popularity of Self-Managed Super Funds (SMSFs) as an effective way of growing your super and perhaps gaining tax efficiencies along the way. But establishing a SMSF is not for everyone. To work out if self- managed super is right for you, start by asking yourself three important questions.



  1. Do you have the right motivation?

The first question you should ask yourself is ‘why do I want to manage my own super?’.  If you’re the type of person who is fantastic at managing your financial affairs outside of super and you want to have the same control over your superannuation, then great.  But if you think that a self-managed super fund may be cheaper or allow you purchase assets for immediate lifestyle benefits, such as a holiday house, you should think twice about establishing a SMSF.  SMSFs are not necessarily cheaper and not keeping your SMSF assets separate from your personal assets may result in the ATO imposing harsh penalties.


  1. Do you have the time and skill?

SMSFs are different to other superannuation funds because the SMSF members (which must be less than five) act as trustees of the fund. Being a SMSF trustee involves taking full legal responsibility for all decisions made in the SMSF.  Superannuation laws can be complex and non-compliance with these laws can result in fines and the closure of your SMSF by the ATO.  So unless you have the time and skill necessary to run a SMSF, keeping on top of your duties and obligations will be tough.  A background in either finance, financial planning, accounting or law will make it easier for you to keep on top of superannuation laws, tax rules and reporting requirements.


  1. Do you have enough super to make it worthwhile?

Ongoing administration fees for SMSFs vary depending on the fund’s balance.  The fund’s balance may be made up of just your own super if you’re the only member, or the combined balances of each member in your SMSF.  As a general rule of thumb, you need around $200,000 in a SMSF for it to be cost-effective.

Obviously, the higher your super balance the lower the fees would be as a percentage of your super.


What’s super about SMSFs?

If you have answered yes to the above questions, then you might want to start thinking about the benefits of setting up a SMSF.  The main advantages are:

  • You have a greater range of investment choice:
    You have the ability to invest in a wide range of investments including direct assets (such as property), and non-traditional assets, (such as business real property).
  • It can be more tax efficient:
    You may be able to time the purchase and disposal of your assets to minimise any capital gains tax liabilities.
  • You have greater flexibility around estate planning:
    SMSFs provide far greater flexibility around estate planning issues than any other super fund, making it easier for you transfer your wealth to future generations in a tax-effective manner.
  • It gives you asset protection: your assets are protected on bankruptcy or litigation, which may be of particular interest to you if you’re a small business owner.


The decision in establishing a SMSF shouldn’t be made hastily without knowing all the finer details.

A good starting point is looking at the ATO website and then seeking professional financial advice to review your options.

Subscribe to our newsletter

Enter your details below to receive regular updates, industry news and announcements

  • This field is for validation purposes and should be left unchanged.