How do you know if a Self Managed Super Fund is right for you?

What is a Self Managed Super Fund (SMSF)? Regulated by the Australian Taxation Office (ATO), SMSFs offer an alternative to the super funds run by financial institutions, employers and industry funds like Cbus. SMSFs are typically family or one-member funds. They are established under Trust Law and require an independent auditor to be appointed each year to examine your fund's financial statements and assess the fund's compliance with super law.

SMSF questions you need to ask

SMSFs aren’t for everyone. To help decide whether an SMSF is right for you, consider the following:

  • Do you have time?

Depending on the level of control, you’ll need to devote a couple of hours each week to running the fund and decide who will step in and keep everything running if you get sick or go on holidays. SMSF trustees spend on average eight hours a month to manage an SMSF. That's almost 100 hours a year. (Source: SMSF Investor Report, April 2019, Investment Trends)

  • Do you have the knowledge and experience?

You’ll need to be familiar and comply with superannuation, tax and other relevant legislation, your fund’s Trust Deed and administrative requirements set by the government and financial services regulators. Failure to meet your legal responsibilities may result in penalties.

  • Do you have enough super?

Generally, if you have less than $500,000* in super assets, the costs associated with running a SMSF may be higher than other alternatives. The more super you have, the more economically viable an SMSF becomes.

  • Will you get a better result?

One of the main advantages of SMSFs is that you get to pick your own investments. Consider whether you have the knowledge and expertise to  achieve returns  comparable with a regular super fund.

Do you have the skills and knowledge to achieve your desired returns? Or will you need to pay advisers and/or your accountant to help implement your investment strategy?

  • Can you afford it?

It’s hard to say exactly how much it costs to set up and run an SMSF as every investor is different...however the ATO found the average SMSF operating expenses in 2019 was  $6,450. The median cost was $4,069#.

There are three main costs associated with SMSFs:

1. Set-up costs: To set up the Trust Deed, etc.

2. Administration and compliance costs: Auditing, tax and accounting costs.

3. Investment costs: These are depending on how complex and sophisticated your investments are and how often transactions are made.

 

*https://moneysmart.gov.au/how-super-works/self-managed-super-funds-smsf

#Self-managed super funds: a statistical overview 2018-19 (published March 2021), Australian Taxation Office, Table 25: Expenses

SMSFs have some disadvantages

  • You bear the risk: As the trustee, you are legally responsible for every decision and action your fund makes. Even if you get professional advice, the responsibility ultimately rests with you. Violation of the strict laws that govern the super industry could mean the loss of tax concessions in addition to tax and legal prosecution.
  •  It’s time-consuming: Meeting all the legal and administrative requirements can take a lot of time and effort. Any outside help you get will be an additional cost to the fund and you’ll need to be sure about who is running it when you are sick or on holiday.
  • There’s no independent umpire: SMSF trustees don’t have access to the Australian Financial Complaints Authority if problems arise. As many SMSFs are family structures, any disagreements about how the fund is managed could result in costly and time-consuming legal action. SMSFs have less protections against theft and fraud than APRA regulated funds.
  • Difficulties when closing down your SMSF: If you decide to close down your SMSF, there are significant administration steps that you must fulfil. The ATO must be notified and you will also have to do the following: - Payout or rollover member benefits in compliance with superannuation and tax laws and your Trust Deed. - Arrange a final audit and the final SMSF annual return. - Receive confirmation from the ATO that your SMSF has been wound up. - Close your SMSF bank account(s).

Do you meet the sole purpose test?

Starting an SMSF doesn’t mean you can access your super benefits early or use the money to pay off your mortgage or go on a holiday. Like all superannuation funds, SMSFs must be maintained for the sole purpose of providing retirement or ancillary (death/ill health) benefits, and the ATO imposes harsh penalties for breaches and they may also prosecute  for compliance failure. Residential property in your SMSF can’t be used by yourself or related parties.

What are you giving up?

Cbus offers access to affordable death, disablement and income protection insurance cover because of our large membership numbers. With an SMSF, you may not be able to get the same cover and you may need a medical assessment. Additionally, you will no longer have access to the Cbus' advice team.

On average, SMSFs haven’t outperformed APRA regulated funds

The table below compares the average returns for SMSFs. On average APRA-regulated super funds like Cbus achieved higher returns.

The returns you can expect from your SMSF are largely determined by the total funds under management, investment strategy and operating costs. If your assets total more than $500,000* , it's more likely your SMSFs returns may be competitive with APRA-regulated funds.

 

Self-managed super funds: a statistical overview 2018-19 (published March 2021), Australian Taxation Office, Table 23: Average returns for SMSFs and APRA Statistics – Quarterly Superannuation Performance (published August 2019)

*https://moneysmart.gov.au/how-super-works/self-managed-super-funds-smsf

Past performance is not a reliable indicator of future performance.

SMSFs have some advantages

  • You’re in control financially and legally: As the trustee, you have complete control over the fund’s investments. You and any other members of the fund are responsible for making decisions.
  • Flexible choice and decisions: You decide what, when and how much of your super to invest. You are able to set the framework for making investment decisions and switch or modify those investments as you see fit.
  • Responsibility over design and operation: You have a degree of control over the rules of the fund and how it operates; however, it’s important for you to be aware of regulatory changes and ensuring that your fund complies with them.
Learn more

Get the right advice

If your accountant or financial adviser has recommended that you start an SMSF but you’re unsure whether it’s right for you, get a second opinion. It’s your money and how you invest it can have a significant effect on your lifestyle in retirement. You should ask questions about both the set-up costs and ongoing cost, how much time is required to run your SMSF and what decisions are you going to make yourself and what ones you will pay someone to make for you.

Download our SMSF fact sheet

How to return to Cbus?

If you’ve been running your own SMSF and have had enough? Our Advice Services Team are here to assist you make the transition and help set up your new Cbus account. They can provide advice around planning your new investment and contribution strategy.

How to open a Cbus super account and roll over your SMSF balance

1. Open a Cbus super account

Depending on whether you’re still working or are already retired, you’ll need to roll over your super into either a Cbus super or super income stream account.

If you’re working, it’s easy to join Cbus online at cbussuper.com.au/join.

If you’re retired, call us on 1300 361 784 and dial 4 to speak with a Cbus Adviser to set up your account.

Already have a Cbus account? Have your Cbus member number handy.

 

2. Roll over your SMSF super balance into your Cbus account

Simply log into your online account at cbussuper.com.au/login and go to Consolidate your super.

You will need to provide us with the SMSF name, ABN and Electronic Service Address (ESA) of your SMSF to rollover any super from your SMSF to Cbus. If you need an ESA, you can obtain this from:

  • your SMSF Administrator, tax agent, accountant or bank; 

    or

  • a dedicated SMSF messaging provider – go to ato.gov.au for registered providers.
        or

Talk to Cbus

The Cbus Advice Services Team can give you financial advice on any aspect of your Cbus super account, over the phone. There’s no additional cost to speak with an adviser – it’s part of your Cbus membership.

If you need advice on more complex matters, the Cbus Advice Services Team can refer you to an accredited financial planner for a face to-face meeting. The financial planner can offer you advice on a fee-for-service basis. Your first visit is free and any fees for advice will be agreed with you in advance.

Visit the Cbus advice page or call  1300 361 784  (option 4) to find out more.

Additional information

The ATO provides a detailed overview of what you need to consider before setting up an SMSF, how to set up and run an SMSF, and how to wind up an SMSF. Visit  the ATO website for details.

General Advice Warning

The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions. You should also read the relevant Cbus Product Disclosure Statement and Financial Services Guide and Target Market Determination before making any financial decisions. Call 1300 361 784 for a copy.. Cbus' Trustee is United Super Pty Ltd ABN 46 006 261 623, AFSL 233792, Cbus ABN 75 493 363 262. MySuper authorisation 75 493 363 262 473.

Past performance is not a reliable indicator of future performance.

 

Additional information

The ATO provides a detailed overview of what you need to consider before setting up an SMSF, how to set up and run an SMSF, and how to wind up an SMSF. Visit  the ATO website for details.

General Advice Warning

The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions. You should also read the relevant Cbus Product Disclosure Statement and Financial Services Guide and Target Market Determination before making any financial decisions. Call 1300 361 784 for a copy.. Cbus' Trustee is United Super Pty Ltd ABN 46 006 261 623, AFSL 233792, Cbus ABN 75 493 363 262. MySuper authorisation 75 493 363 262 473.

 

Want more control over your super? Check out Cbus Self Managed

Cbus Self Managed gives you many of the features of an SMSF, without the admin. We look after the tax, audits, compliance and other legal tasks. Plus, you get access to industry-tailored insurance, built for you.
Cbus Self Managed allows you to invest directly in term deposits, shares and S&P/ASX 300 Index, exchange traded funds and the Cbus Self Managed Property* and Infrastructure funds using a simple online platform.
*Direct investment in a property of your choice is not available through Cbus Self Managed.
Exchange Traded Funds (ETFs) and Shares on the S&P/ASPX 300 Index
Term deposits
Cbus Self Managed Property's Infrastructure

Try Cbus Self Managed now

Our Free Access package lets you access UBS research and Morningstar market data, as well as track individual stock movements.

Simply log into your account and click on 'Cbus Self Managed' next to the 'Super' tab to get started.

Try it now

 

We're here to help

Call Cbus Advice Services on 1300 361 784, press 4 to be connected, 8.30am to 6pm Monday to Friday (AEDT/AEST).
Email: advice@cbussuper.com.au
Or use our online form to request a call from Advice Services.
Read our Financial Services Guide (PDF)