How to decide if you should set up your own SMSF: Ed Chan

How to decide if you should set up your own SMSF: Ed Chan
How to decide if you should set up your own SMSF: Ed Chan


Most Australians entrust their super funds to professionals but you can control your own superannuation and invest your contribution yourself.

Managing your super not only gives you the opportunity to take matters into your own hands, you may also save thousands of dollars on fees.

However, you need to know if managing your own super is right for you.

The biggest advantage of setting up your own SMSF is control. You can invest your money the way you want to – in companies, a property or a fixed interest term deposit.

You can choose among a wide range of investment options like direct mortgages, bank deposits, managed funds, direct property and shares.

Another advantage of DIY SMSF is lower fees. If you have over $300,000 in your superannuation, you may be able to operate your SMSF for less than the annual management fees of a company.

You can also use gearing and leverage to purchase assets like shares and property to expand your investment portfolio faster.

Remember that contributions to your SMSF are tax deductible so you can save more tax through franked dividend income and timing your capital gains carefully.

SMSFs also let you buy other assets for a maximum of 15% tax. SMSFs can continue indefinitely and family members may still enjoy this benefit even after the member's death.

However, you should be aware of the disadvantages, too. As a trustee, make sure you comply with super and taxation laws otherwise, you can be charged a hefty fine and even be imprisoned.

You also have to be savvy about investing to ensure that your SMSF is earning more than what a super company could earn. If not, you can choose to appoint brokers or advisors for a fee.

You will also be required to meet all record-keeping and reporting obligations such as transactions and contribution records and annual tax returns.

Just the same, you may want to ask the experts to handle this for a fee. Another downside of setting up your own SMSF is it may be less diversified than it could have been if handled by a superannuation company.

Note that gearing may add to the risk and though super funds sometimes come with insurance coverage, you still have to get an independent life, income protection and total permanent disability insurance that you need.

Do you think you can set up your own SMSF? Why don't you assemble a team of professionals, such as a lawyer, experienced investor, SMSF expert and financial partner to help you?

You can start with a solicitor, accountant, investment strategist and financial planner. Check their fees and accreditation and don't be afraid to get a second opinion.

ED CHAN is founder and non executive chairman of Chan & Naylor Accountants.

Click here to schedule a chat or call one of their local offices.

Ed Chan

Ed Chan

Ed Chan is a founding partner of Chan & Naylor accountants and a leading property tax specialist.

Smsfs Chan And Naylor

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