With so much information around superannuation, it is difficult to understand the in’s and out’s. Is an SMSF cheaper or right for me? What is the difference between my current superannuation account and that of an SMSF? We break it down below.

The pool of superannuation benefits in Australia is increasing at a rapid rate and so are the amount of SMSF’s being established, which make them the new hot topic; however you need to understand the costs and responsibilities involved before committing to this structure.

Below are the general types of superannuation funds available in Australia:

• Retail superannuation funds are regulated by APRA, typically anyone can join a retail fund and they will vary in terms of underlying investments and features.
• Industry funds are usually restricted to employees in a particular industry. Some industry funds now have the ability to let anyone in Australia join.
• Public sector funds are created for employees of federal and state government departments. Typically only available for employees in a government role.
• Corporate super funds are created by employers for their employees to get access to grouped benefits including discounts and rebates.

Below are some key differences between retail superannuation funds and SMSFs:

Retail Superannuation

Number of Members                             1

Typical Size of Fund                              $0 to $200,000

Typical Cost of Fund                             Total costs 1.0% – 2.5%

Type of Investments Available        Managed Funds (including Listed Property)

Direct Equities

Exchange Traded Funds

Term Deposits Cash

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.

Self Managed Superannuation Fund

Number of Members                                 4

Typical Size of Fund                                  $200,000+

Typical Cost of Fund                                 Depends on the size of fund and types of investments. Ongoing Accounting and Audit costs range typically between $2,000-$3,000 per annum

Type of Investments Available             Managed Funds (including Listed Property)

Business real property

Direct Equities

Exchange Traded Funds

Term Deposits

Cash Collectibles (e.g. Artwork)

Legal Obligations                                  Trustees of the SMSF ultimately accept the legal responsibilities so should under their obligations before setting up a fund.

Typically we do not recommend clients establish a SMSF until they have assets inside superannuation over around $200,000 combined as the ongoing expenses of running the fund aren’t cost effective when compared with a retail or industry fund below that balance.

A SMSF provides a greater level of control that can’t be achieved with a retail or industry superannuation fund in terms of the underlying investments and strategies available. 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.

To find out if a Self-Managed Superannuation Fund is right for you or to discuss potential options for your own situation, please contact our office at 02 9188 1547 or email

Ronald.pratap@rpwealthmanagement.com.au

Our office location is at Oran Park Podium or we can arrange a home or office visit for an appointment.

To find out more visit the Australian government run website to understand your obligations and details of running an SMSF at:

https://www.moneysmart.gov.au/superannuation-and-retirement/self-managed-super-fund-smsf