Most of you may have heard about self-managed super funds or SMSF. However, when it comes to knowing about it in details, very few of you will know what it is all about. SMSF or self-managed super fund is a privately controlled super fund. It means that you manage the find all by yourself. It is extremely different from all the other professionally managed funds such as retail and industry funds.
When you decide to go ahead with your super fund, you need to put all the money that you would normally put into a professionally managed super fund into your SMSF. You are the only person responsible to choose the type of investment for the funds along with the insurance. You will also be the only person who will control every aspect of the fund.
It is important for you to understand that your SMSF may have a maximum of four member, who may either be your friends or family members. Most of the SMSF’s have two or more members. If you become the member, it means that you are a trustee of the fund or you may even get a corporate trustee. Whatever be the situation, you will have the entre control of the fund.
Responsibilities and Risks of SMSF
All the members of an Arrowfa.com.au SMSF are responsible for taking the decisions pertaining to the super fund and for complying with the law. There are also several risks involved. Some of these risks are discussed below.
- You are personally liable to all the decisions of the fund. This is true even if you seek professional help or if some other member made the decision.
- You may fail to get the returns from the investment that you had expected.
- It is your responsibility to manage the fund even if you are in a different situation. For example even if you lose your job, you will have to manage the fund.
- If the relationship between the members is broken, it may cause a negative impact on the SMSF. This is possible even if a member becomes ill or passes away.
- If there is a fraud or a theft and you lose money, you will not be entitled to any special compensation schemes and neither to the Superannuation Complaints Tribunal.
- You may easily lose insurance if you move from a professionally managed fund to your SMSF.
A Successful SMSF Takes Money and Time
It is needless to say that managing an SMSF means a lot of work is involved. If you consider getting professional assistance, that would mean wasting a lot of time. You will require a lot of time to set up the super fund along with time to manage the various ongoing activities. These activities will include researching the various investments, setting and also following a chosen investment strategy, and keeping record, accounting, as well as arranging an audit every year by an approved SMSF auditor.
Under normal circumstances, SMSF trustees spend around 8 hours each month in managing an SMSF, which results to around 100 hours annually.
As a former CEO of a medium-sized business, I have a lot of experience in different aspects of business and finance. Now that I am retired, I love to share my knowledge with others and also love to help young entrepreneurs create and grow their life-long passions.