One of the benefits of establishing or opting for a SMSF is the control given over where the money is invested. It also comes with specific administrative responsibilities to keep you and your fund compliant and protected. A SMSF undoubtedly requires an ‘attention to detail’ approach.
It is important to create and follow an investment strategy that will help manage the SMSF and this will need to be updated regularly depending on the performance of the SMSF. When creating an investment strategy, it is important to assess the risk and plan ahead for retirement, which can be difficult if one is not equipped with the necessary knowledge. In terms of legal knowledge, complying with tax, super and other relevant regulations requires a basic level of understanding at the very least.
The accounting, record keeping and arranging of audits throughout the year and every year also need to be conducted up to par. Data shows that SMSF trustees spend an average of 8 hours per month managing their SMSFs.
The set-up and maintenance costs of SMSFs such as tax advice, financial advice, legal advice and hiring an accredited auditor must be considered. The operating cost of a SMSF averages around $6,000. This amount is inclusive of deductible and non-deductible expenses such as auditor fees, management and administration expenses etc., but not inclusive of costs such as investment and insurance expenses.
Members/trustees need to invest time and money into managing the fund and on top of this, are required to have some financial and legal knowledge to successfully manage the fund.
SMSF Fraud Alert
Self Managed Super Fund identity fraud and scams continue to rise and becoming more sophisticated in their targeting. These fraudulent perpetrators use stolen identity information or may harvest information from individuals by cold calling the victim and presenting themselves as superannuation experts.
What to look out for
They typically offer superannuation comparisons and/or high-return investment options through the establishment of a fraudulent SMSF. If it doesn’t sound right, it more likely isn’t. Remain vigilant, and remember that if you are dealing with an advisor for the benefit of your SMSF, you should check to see if the advisor is listed on ASIC’s Professional registers or Moneysmart’s list of unlicensed companies you should not deal with.
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