In my experience, SMSFs are appropriate for some people, but they do not suit the vast majority of superannuation members. As Principal Financial Adviser and Director of Gary Weigh & Associates Pty Ltd www.garyweigh.com, I receive many client enquires asking me whether taking on SMSF management personally is something they should consider.
I cite three (3) reasons why the SMSF superannuation structure is not appropriate for the majority of people:
- Although there is no magic threshold ‘balance’, most couples don’t have enough superannuation money between them to start an SMSF and run it cost effectively.
- It is rare to find that all members of an SMSF have equal enthusiasm and / or required competence to take on trustee responsibility. Typically, one person dominates decision-making and management activity. This can cause problems when the active trustee is no longer able to manage.
- Personal management of an SMSF is widely regarded as a chore, not a retirement lifestyle. Amongst an ageing member-trustee population, there are so many other things that most retirees would rather be doing.
I would caution that rather than dive straight into an SMSF, many people would be better off to opt for a personal superannuation solution in the short term; become proactive with their super, and put a plan in place to work towards the SMSF later on if that’s what they want.
Furthermore, I believe that if there is no real intention to invest directly into real estate property, then personal superannuation should be seriously considered. That way, the trustee responsibility, compliance and administration is taken care of.
I am still surprised that so many people are still unaware of the superannuation wrap. This is a type of personal super that departs from the traditional ‘managed funds only’ model. It allows investors a lot more investment control by allowing term deposits, direct shares and managed funds to be grouped under a single administration platform.
Even if people do want to invest directly into real estate property, or want control without the burden of trustee responsibility, a Small APRA Fund (SAF) should be a consideration. The SAF structure resembles the SMSF in every way except the trustee is an ASIC-approved commercial trustee company.
For more information about SMSF and other retirement services visit www.garyweigh.com.
General advice warning
The article above is general advice only designed to educate and heighten awareness of self-managed superannuation issues. It should not be regarded as personal advice, because it does not take into account your personal circumstances, financial situation or specific goals. For personal advice that is tailored to your needs, please contact me or consult your licensed financial adviser.