An SMSF is a time-consuming practice. Whilst it does have its advantages, it can go horribly wrong if you don’t know what you’re doing. On top of knowing the ins and outs, you must also ensure you’re adhering to the strict guidelines laid out by the Australian Tax Office as failure to do so can attract a hefty fine. In today’s blog, our SMSF accountants in Melbourne are going to be going through five myths that surround self-managed super funds and breaking them down for you.
1. SMSF’s only benefit the wealthy
This is probably the biggest one that exists in relation to an SMSF and it is absolutely not true. It is true that the more money you have then the higher your chances are of getting more out of an SMSF, but it is not exclusively beneficial to wealthy people. The key to a successfully run SMSF is knowing your way around it and investing the time to manage it correctly – regardless of how much money you’ve allocated to it.
2. An SMSF makes it easier to buy property
If you have an SMSF you can purchase property as part of an investment to add to your portfolio. But this doesn’t necessarily make it easier. It is actually simpler and more beneficial to invest in property without using an SMSF as it carries with it various laws and restrictions.
These laws make it a bit more tedious and difficult to invest in property using an SMSF as you’ll need to ensure that you’re in compliance with the laws. For example, you will be able to use your SMSF to purchase a residential property for a related party only if it is listed for shares or it is a business real property.
3. Opening your own SMSF is a gamble
This claim depends solely on what you make of it. An SMSF is no easy task and requires a lot of time and effort. It is important to read up on the benefits and tips on managing an SMSF before entering in one. The other thing you need to determine is whether or not you’re fit to run it yourself, or whether you’ll be needing to outsource the managing to professionals.
If so, then you’ll need to factor in their fees. Because you’re the overall manager of the fund, you’ll still have complete control over it and can even do some roles yourself and outsource others to professionals. An SMSF isn’t for everybody so know what you’re getting into before you open one and do heavy research to determine if it’s really for you or not.
4. An SMSF is expensive to set-up
This depends on the type of SMSF you’re setting up. There are two types, the individual trusteeand the corporate trustee. The features of the two trustee types are:
- Individual trustees – Must have two trustees and one of them must be a fund member. If the fund member is an employee of the other trustee, then they must be relatives.
- Corporate trustee – They can only have either one or two directors. The fund member must be one of the directors and if the fund member is an employee of the other director then they must be relatives.
If you’re running an individual trustee, then it is actually not that costly to set-up. You will not incur any ASIC fees so the initial and ongoing costs will be less than that of a corporate trustee – which will incur ASIC fees as well as an annual review fee. Both corporate and individual trustees cannot be paid for their services as trustees.
5. It’s essentially a DIY super?
In essence this may be the case, however, it is very unlikely that you’ll be managing it entirely on your own. As our Melbourne SMSF accountants mentioned above, you’re able to outsource some of the specific parts of your SMSF and let professionals do the job for you. This is a wise decision as even if you are capable of performing the tasks, the last thing you want is a minute mistake that could reap further repercussions down the track. It may seem like a pointless exercise – having a self-managed super fund and outsourcing some if not all of the management of it – but that’s not what makes an SMSF.
Are you looking for Melbourne SMSF accountants?
Silverdale Consulting Group’s Melbourne SMSF accountants are highly qualified and experienced SMSF specialists. They’re able to offer expert advice and help you manage your SMSF to help you reach your ideal goal.
If you’re looking for some Melbourne SMSF accountants to help set-up an SMSF – or need some assistance with your current one – then please give us a call on (03) 9497 5885 or fill out the form on our website.