Contrary to common myths, SMSFs offer compelling benefits for those in the know. Discover if the pros outweigh the cons for SMSFs for self-employed business owners.
Most people have their superannuation in a fund managed by a third party – usually a fund manager, large investment corporation or an industry body. A self-managed super fund (SMSF) allows you to take your super investments into your own hands with a superannuation fund that you manage yourself.
Sounds simple, right? Not so fast – SMSFs require a big investment in time, skills and risk management. And if things go wrong, it could leave you much worse off in retirement.
A SMSF works much the same as a regular third-party super fund, but there are some differences in how it is administered and regulated. Key rules include:
A SMSF is in essence a trust, and like any trust, is run by the trustees. There are two SMSF trustee structures:
Certain individuals cannot act as a trustee, including those who have been convicted of an offence involving dishonest conduct, are insolvent or under administration, or subject to civil penalty under the superannuation legislation.
SMSF mythsSMSFs have long been shrouded in mystery, so let’s bust some common myths: 1. You need a balance of at least $200k to start: Wrong. Whilst sub-$200k balances make it challenging to compete with mainstream returns, new technology and electronic administration means lower balances can now be competitive. 2. SMSFs are only for the over-60s: Incorrect. Young and middle-aged investors are increasingly embracing SMSFs as a way to take control of their investments and financial future. 3. SMSFs are too complex and expensive: Not necessarily. New technology, online education courses and professional advisory firms mean it’s easier and cheaper than ever before to set up and manage an SMSF. 4. SMSFs are too risky: It depends. Risk is connected to the ability |
A SMSF becomes a particularly compelling prospect in the context of small business ownership. At its core, a SMSF gives you more control over what you choose to invest your super funds in. This works especially well for small business owners as it enables you to use your super as an investment strategy to support your business goals.
Benefits of SMSF for small business owners include:
While the appeal of choosing a SMSF is complete control, unless you have a high degree of investment knowledge, plus plenty of free time, it’s likely you’ll need some professional help. SMSF service providers can assist with legal, taxation, auditing, administration and investment advice.
While there are many providers available, not all are created equal. It’s important to remember that even if you outsource some tasks, as a trustee of your fund you’re liable for fines and penalties if it all goes pear shaped. So, it pays to get quality support.
When selecting your SMSF support team, look for:
SMSFs don’t last forever with trustees choosing to wind them up for many reasons. It could be the death of a trustee, management being too time consuming or costly, or the investment strategy performing poorly. Whatever the case, it pays to be prepared with a thorough exit strategy to ensure you can get out smoothly and funds end up in the hands of the right people.
Given the complexities of exiting a SMSF, it pays to get professional advice and assistance, but in brief the process is usually as follows:
For self-employed business owners, a SMSF offers compelling benefits – provided you have the time, skills and support to maximise opportunities and manage the risks. If in doubt about whether a SMSF is right for you or how to make it happen, it pays to get advice from an expert accountant with proven SMSF experience.
Make a SMSF work for you and your business with expert accounting advice.
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