Points to consider before setting up SMSF

Superannuation could be considered key to happy retirement life which also contribute tax minimisation lever. It doesn’t matter whether it is held in a traditional super fund or in an SMSF, the right investment mix with the right fee structure is extremely important to ensure that the funds achieve best possible returns.

If you need guidance from an expert in Melbourne, the leading SMSF providers at iCare Super can provide the assistance you need for SMSF setup.

Here we present some points to consider before your own SMSF Fund.

1.    Take the advice of Financial Advisor

Before starting, you must clear yourself the need to set up your own Fund and what would be your earning goal at the time of retirement. It is certainly not on basis that you have heard some facts about this kind of fund and owing to other experiences you jump in the bus. For SMSF setup, you must understand that SMSFs are licensed product and require a specific qualification for recommending. Hence, first of all, you should speak to a financial advisor.

2.    Assessing Cost-benefit investment

 It is not to mention that any financial decision should be cost-effective i.e. before taking the decision to replace existing superannuation with SMSF benefits should outweigh the cost. In case a person is not sure they can take help of their financial advisor. If the change indicates better return perspective then it may bring additional benefits also associated with the SMSF features such as availability of more investment option, greater flexibility and better diversification.

Although there is no minimum balance requirement forSMSF setup, it is generally maintained that balances below $200,000/- do not prove cost-effective. However, one major benefit of this, is flat fee charge irrespective of fund balance, unlike regular superannuation funds where the fee is a charge on a percentage based.

3.    Managing Combined SMSF balances

There is always segregation of the members’ respective superannuation balances within SMSF in an accounting framework, though the combined balance is invested jointly. The percentage of each member’s assets is calculated according to the SMSF annual reporting standard and takes into account the various starting balances as well as the difference in individual contributions to the fund during the year. Revenues generated by this super fund are allocated according to the proportion of funds owned by each member.

4.    Benefit to SME owners

SME owners can save for their retirement if they set up an SMSF. Around 50% of SME owners manage this super fund.

5.    This super fund is not for everyone

If you are planning to invest in this superannuation then be ready to do the work necessary for SMSF setup and manage it on an ongoing basis. There are some responsibilities on anybody who starts this super fund, you have to be well prepared to go through with it.

iCare Super offers service including SMSF setup, accounting, audit and daily administration. With an aim to provide a high quality, low cost, proactive and timely service to all our clients.