SMSFs (self-managed superannuation funds) are one of the greatest ways to get in the driver’s seat and take control over your retirement. Since this superannuation fund is self-managed, it means that you are responsible for all insurances, investments, and management decisions. But, SMSFs are regulated by ATO (Australian Taxation Office) and some consider them inefficient.
- SMSFs are Extremely Risky
As we already mentioned, these funds are managed completely by the trustee in comparison to industry and retail superannuation funds which have managers who make investment decisions. Therefore, being responsible for making investments and complex financial decisions can be considered risky, but the same risk applies to the other funds too. So, essentially, it all comes down to careful planning and making informed choices.
Hence, having an SMSF requires you to have good enough skills to manage your investments. Plus, since the ATO regulates and controls these funds, you must make sure that everything is in accordance with the law so as to avoid paying fines and penalties. This is why you should seek professional help from an experienced accountant.
- Only Wealthy People Have an SMSF
The second myth about SMSFs is that you need to be wealthy in order to have one. However, this is false because there isn’t a specific minimum balance to open an SMSF, even though it is recommended that your opening balance is large. After all, with all of the administration and compliance fees you have to pay, maybe it isn’t worth it to have a low balance. So, make sure you consult your accountant to see whether or not you should have a self-managed superannuation fund.
- Acquiring Property through SMSFs is Easy
Finally, people usually consider that those who have an SMSF can easily buy an investment property through their fund. But, this is also a myth even though it sounds plausible. The truth is, it is much more difficult to manage compared to independent property investment.
The tricky thing is that you cannot live in or rent properties acquired through an SMSF. Plus, this applies to your other SMSF trustees and anyone related – even your third or fourth cousin. What’s more disappointing, you cannot contribute existing property, even those purchased at market value, into an SMSF. All in all, any related parties cannot take advantage of SMSF acquired properties.
The bottom line is that SMSFs aren’t suitable for everyone. So, if you’re planning on opening an SMSF, ensure you contact Syndeo Group to get the best possible advice and recommendation.