If you’re considering starting a self-managed super fund (SMSF) and have a combined super balance of $500,000, it’s worth understanding whether this amount is sufficient and what other factors you should take into account before making the decision.
Is $500,000 enough?
With $500,000 in superannuation, a SMSF might actually be more cost-efficient than maintaining a traditional super fund in the long term. Operating costs, which include things like audits, tax returns, and management fees, are typically fixed, meaning the larger your balance, the less these costs are as a percentage of your total investments within super. For many, a fund of this size offers the flexibility to invest in a broader range of assets that are not available through standard super funds. For example, direct property investments (commercial and residential), shares in unlisted companies and trusts etc.
Shared costs and pooled investments
One of the benefits of a SMSF is that expenses are incurred at the fund level, not by each individual member. If you and your partner share the fund, the costs can be spread across both balances. Additionally, pooling your superannuation may open the door to investment opportunities that you might not have been able to access with individual accounts.
This flexibility could allow you to invest in property, shares, or other assets that align with your investment strategy. The ability to directly control and tailor your investment approach is one of the key attractions of a SMSF.
Time and responsibility
While the financial aspect is important, having a SMSF also requires a commitment of time and responsibility. As a trustee of a SMSF, you are legally obligated to manage the fund according to superannuation laws and the fund’s trust deed. This includes making decisions about investments, compliance, and ensuring reporting obligations are met.
It’s important to assess whether you have the time, interest, and dedication to stay on top of these requirements. The benefit of having direct control over your investments can be highly rewarding, but it also means that the success of the fund largely depends on your active involvement and decision-making.
Developing an investment strategy
A strong, clear investment strategy is essential when managing a SMSF. Beyond just the balance, it’s important to consider your long-term financial goals and how a SMSF fits into that plan. Whether your aim is to invest in property, diversify into shares, or pursue other investment opportunities, your strategy should guide how you manage your superannuation.
The importance of professional advice
An increasing number of Australians are showing greater interest in establishing self-managed super funds. However, many are doing so without seeking proper professional advice, which can pose risks. While it is technically possible to set up and manage a SMSF independently, there are significant legal and compliance obligations that must be met, including the requirement for an independent annual audit.
Seeking professional financial advice can ensure your SMSF is structured correctly from the start, and help you navigate the complex regulatory landscape, ensuring you remain compliant with all legal requirements.
Are you considering starting a SMSF? Contact Rodney Rossi or your q4 team today for professional advice tailored to your specific needs and goals.
Before acting on any General Advice, you should consider whether it is appropriate in light of your particular objectives, financial situation or needs. If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) for that product before making any decisions.
