The Pros and Cons of a Self-Managed Super Fund (SMSF) 

Aug 28, 2023 | Accounting, SMSF

Self-managed super funds (SMSFs) are getting a lot of airplay lately as an excellent way to grow wealth for retirement. In fact, SMSFs are the fastest growing super sector in Australia. But is setting up a self-managed super fund the right path for growing your wealth? There are definite advantages and disadvantages to SMSFs, so it is important to weigh up the pros and cons to determine whether an SMSF is right for you. 

What is an SMSF? 

A self-managed super fund is a private superannuation fund with no more than six members. Instead of putting monies into a retail or industry super fund, you deposit them into your own private fund. The investment and insurance choices are yours, but the responsibility for managing the fund and for ensuring government regulation compliance is also yours. 

Takeaway:  A self-managed super fund can leverage the tax benefits of super while giving you flexibility and control for one of your most important wealth assets – now and into the future. 

Top three benefits of an SMSF

1. Investment control and choice 

Instead of leaving it up to a large retail or industry fund, you can establish your own investment strategy and directly control where and how your money is invested. You might want to only ‘go green’ or investigate the ins and outs of ‘responsible investment’. You might want to look at property or shares or ‘collectables’ such as artwork, stamps, or coins. With a few exceptions, the choice is yours! 

2. Estate planning 

With the opportunity to include up to six members in the one fund, the next generation can have their superannuation pooled in the one place. This may allow you to invest in assets of higher value than if your fund was set up with fewer members. You can also nominate who you would like to receive your super funds when you pass away without some of the constraints that apply to retail and industry funds. 

3. Tax management 

A self-managed super fund has the same tax rate as other superannuation funds. Having increased control over investment decisions, however, allows for the strategic planning of the timing of tax events for the most effective tax management. 

Self-managed super fund disadvantages 

While an SMSF offers flexibility and choice when it comes to investing for your retirement, it also comes with some potential disadvantages. The first is that starting your SMSF can be time consuming. Getting a good understanding of your investment options and the market is important to make the best financial choices to reach financial freedom, and this can take time. It can also be highly rewarding as you investigate the options and opportunities. 

An SMSF also comes with the responsibility for meeting a range of strict legal and other obligations. Non-compliance with governmental rules and regulations can result in penalties that could be costly. 

Seek advice from an experienced Geelong SMSF team 

At LBW our self-managed super fund team are ruminating on SMSFs over their cornflakes, chatting about it over their lunchtime sushi and (we’ve been told) dreaming about it overnight. You could say they are the SMSF experts! From SMSF set up, contribution planning strategies, auditing and compliance advice to full fund administration, they are here to help you achieve your financial goals, faster. 

When it comes to self-managed super funds, partnering with LBW is the smart choice. We can help to put your hard-earned superannuation to work in the most effective way possible and provide peace of mind that you are taking the right financial steps forward. 

Discover your wealth potential and reach out to the team today. 

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