SMSFs aren’t for everyone. To help decide whether an SMSF is right for you, consider the following:
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?
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.
#Self-managed super funds: a statistical overview 2018-19 (published March 2021), Australian Taxation Office, Table 25: Expenses