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Self Managed Super Fund vs Retail when to make the switch

www.financiallywellorganised.com info@fwo.net.au


Self Managed Super Funds Demystified In the four years to 30 June 2012, the SMSF sector grew by $109 billion or 33%. In dollar terms, this represents the strongest growing sector of the $1.4 trillion Australian superannuation industry. The graph below shows in dollar terms how the SMSF sector contributed the largest proportion of overall growth with 42% of the total growth in superannuation assets from 2008 to 2012.

Source: ATO

SMSFs now equate to 32% of all superannuation, with industry funds controlling 19% and retail funds at 28%. A decade ago, SMSFs controlled only 10% per cent of superannuation allocation. Below are the types of superannuation funds available in Australia: • Retail superannuation funds are regulated by APRA, typically anyone can join a retail fund. • Industry funds are usually restricted to employees in a particular industry. Some industry funds now have the ability to let anyone join. • Public sector funds are created for employees of federal and state government departments. Typically only available for government employees. • Corporate super funds are created by employers for their employees to get access to grouped benefits.


With the growth of SMSFs in Australia increasing, we take a look below at the key differences between retail superannuation funds and SMSFs:

Retail Superannuation

Self Managed Superannuation Fund

Number of Members

1 Member

Up to 4 Members

Typical Size of Fund

$0 to $200,000

Between $200,000 - $1,000,000

Typical Cost of Fund

Total costs 1.0% - 3.0%

Depends on the size of fund and types of investments. Accounting and Audit costs typically $3,000 per annum for a fund with basic investments and assets.

Type of Investments Available

Managed Funds (including Listed Property) Direct Equities Exchange Traded Funds Term Deposits Cash

Managed Funds (including Listed Property) Business real property Direct Equities Exchange Traded Funds Term Deposits Cash Collectibles (e.g. Artwork)

Legal Obligations

The Trustee of an APRA regulated fund must be registered or licensed through APRA. APRA funds are subject to a substantial prudential regime.

Trustees of the SMSF accept the legal responsibilities.

Typically we do not recommend clients establish a SMSF until they have more than $200,000$300,000 in assets as the ongoing costs of running the fund become cost prohibitive when compared with APRA regulated funds, (i.e. retail and industry funds). A SMSF provides a greater level of control that can’t be achieved with a retail or industry superannuation fund. Through the extra level of control you will have a greater level of engagement in the investment decisions that ultimately build your retirement nest egg.


Potential Advantages of Self Managed Super Funds include: • Actively participating in the management of your fund. • Ability to run an income stream in retirement within the same structure. • Flexibility to tailor the fund to your own circumstances during all phases of life including estate planning. • Ability to time the purchase and disposal of your assets to minimise any capital gains tax liabilities. • Greater range of investment choices, including the ability to invest in direct assets such as listed equities or property and also the opportunity to hold non-traditional assets. • Ability to transfer ‘in-specie’ your existing assets into your SMSF, whether it be listed securities, managed funds or your real business property. • Creditor protection. A particular interest to small business owners is the protection of fund assets on bankruptcy. Bankrupt members are allowed to withdraw benefits of up to approximately $1 million and receive the same protection out of the fund. • You have the option of including risk insurance through your SMSF. The Potential Disadvantages of Self Managed Super Funds include the following: • Being a trustee of your own fund can require a considerable amount of work on compliance related matters, as well as managing and researching investments. • You will not automatically be covered for life or disability insurance cover within a selfmanaged fund so this would have to be applied for as a separate exercise. • Inability to access the Superannuation Complaints Tribunal. SMSFs are not entitled to claim a grant for financial assistance from the government in the event of a loss of funds through fraud or theft. If you would like to explore the option of having a SMSF as your chosen investment vehicle for your retirement nest egg please contact our Financial Adviser Tim Ward.

Tim Ward Financial Adviser FWO Chartered Accountants tim@fwo.net.au (07) 3833 3999


Ground Floor, Green Square North Tower 515 St Paul’s Terrace, Fortitude Valley QLD 4006 GPO Box 81, Brisbane QLD 4001 www.financiallywellorganised.com Ph: 07 3833 3999 Fax: 07 3833 3900 info@fwo.net.au


Self Managed Super Fund vs Retail