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SMSF Updates

What are the Matters or Issues You Should Consider When Setting up a SMSF?

27 Feb, 2023

When setting up a self-managed superannuation fund (SMSF), there are several matters or issues that should be carefully considered. Here are some key considerations to keep in mind:

  1. Cost: Setting up and managing an SMSF can be more expensive than other types of superannuation funds. SMSFs require professional services such as accounting, legal and auditing, which can add to the costs of running the fund. Nevertheless, iCare Super offers free or low-cost setup and ongoing administration services, which can help minimize these costs issues.
  2. Trustee responsibility: As an SMSF trustee, you will have a legal obligation to ensure the fund is managed in compliance with all superannuation regulations. You will also have a duty to act in the best interests of all fund members.
  3. Time commitment: SMSF trustees are responsible for managing the fund’s investments, maintaining records, and ensuring compliance with all regulatory requirements. This can be time-consuming, especially if the fund’s investments are complex or require frequent monitoring.
  4. Investment strategy: SMSFs provide greater flexibility and control over investment decisions, but this also means that investment risk is borne solely by the fund members. Trustees should have a clear investment strategy in place that aligns with the fund’s objectives and members’ risk tolerance.
  5. Limited membership: SMSFs can have up to six members, which can limit the fund’s capacity to grow. Additionally, if one member leaves the fund, the remaining members may need to take on additional responsibilities.
  6. Exit strategy: SMSFs are generally considered long-term investments, and it is important to have an exit strategy in place in case of unforeseen circumstances, such as the death of a member or the need to dissolve the fund.
  7. Professional advice: Given the complexities involved in setting up and managing an SMSF, it is highly recommended that individuals seek professional advice from an experienced SMSF provider or financial advisor.
  8. Lack of protection: SMSFs are not covered by the government’s superannuation guarantee scheme, which means that members may not receive compensation in the event of fraud or theft.

By carefully considering these issues, individuals can make an informed decision about whether an SMSF is the right choice for them, and ensure that the fund is set up and managed in a way that maximizes returns and minimizes risk.

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