Self Managed Super Funds (SMSFs) are very popular, and growing like wildfire. Ten years ago there was approximately $11 billion invested across 80,000 SMSFs in Australia. That grew to $439 billion across 478,000 SMSFs by 2012 which equated to about 30 per cent of the total funds Australians had put aside for their retirement. The growth rate for SMSFs continues to grow at a great rate with Australians directing about $500 million into SMSFs on a weekly basis.
There are a number of reasons why SMSFs are so popular – the control, transparency, flexibility and flat costs being the main reasons.
If you set up a SMSF, you are responsible for its investment decisions and complying with the strict rules regulated by the Australian Taxation Office. Not complying can be extremely costly. When you establish an SMSF you become a trustee of the fund and ultimate responsibility rests with the trustee.
So it pays to have good advice – and that’s what we’re here to provide – we guide and support our clients to ensure their fund is managed according to the rules and remains compliant. We carry out all the required administration and help with the investment decisions. We also consider very carefully whether or not a SMSF is indeed suitable because we do not set up our clients to fail.
Cost is another factor, and you don’t always get what you pay for when you engage the services of a professional provider.
We recently met with a potential client who had already established a SMSF with the help of their accountant at a cost of $10,000. This particular client had another 3 super funds that hadn’t been consolidated into their SMSF. Furthermore, their SMSF borrowed money to invest in property and a Bare Trust was established to enable this – yet they had enough money in their other super funds to buy the property outright and still have sufficient liquidity, and could have avoided the cost of establishing a Bare Trust and the subsequent borrowing and running costs.
It pays to do your due diligence before establishing a SMSF.