SMSF Management – What are the Benefits of Professional SMSF Administration
Self-managed super funds are growing in popularity in Australia for many good reasons. According to the ATO, more than 603,000 SMSFs hold $869 billion in assets, with more than 1.1 million members. In 2020–2021, SMSFs had assets of $1.5 million on average, up 15% over the previous year and 25% over five years.
Maximising the benefits of a self-managed superannuation fund (SMSF) necessitates astute management; however, individuals may lack the requisite time and expertise to fulfil this. Consequently, engaging professional SMSF management and administration services can alleviate the burden of managing such a fund and ensure adherence to regulatory requirements. This is particularly pertinent for those who have already established an SMSF or are contemplating the prospect of setting up one.
What is SMSF management and what are the benefits?
SMSFs encompass a comprehensive range of services throughout the entirety of a self-managed super fund. These can include:
Establishing the fund – from the beginning, an SMSF manager will ensure that the fund is set up correctly to receive contributions, be easily managed and be eligible for tax concessions. Having a specialist SMSF advisor will ensure that you cover the finer points. For example, an SMSF can have a maximum of 6 members and be established and run with the sole purpose of providing retirement benefits to its members. Setting up your SMSF correctly from the start will enable you to maximise the benefits and minimise the costs of your SMSF.
Compliance – firms offering SMSF administration services will also ensure all compliance issues are met, including annual tax obligations. There’s a range of compliance obligations to keep up with, including:
Developing an investment strategy and making sure that all investment decisions fit this strategy
Monitoring the total SMSF balance and transfer caps
Keeping up with reporting, administration and record-keeping requirements
Residency requirements – for example, at least 50% of the SMSF membership must be in Australia (measured by market value)
Ensuring that contributions are only received from fund members
Only making SMSF benefit payments to members who have met a condition of release
Having a registered auditor
Lodging the SMSFs annual ATO returns within the strict lodgement dates, meeting asset valuation requirements, and paying tax
Complying with prohibitions from borrowing money and exceptions under superannuation law, such as limited recourse borrowing arrangements (LRBA) which can be used for acquiring property under the SMSF.
Investments – an SMSF financial advisor can assist with managing the fund's investments to ensure it complies with the fund's purpose to provide members with retirement benefits. One of the big benefits of having a self-managed super fund is flexibility and increased investment options. If you try to manage your fund yourself and don’t know your investment options, you won’t get the full benefits. For example, if you own your own business, there are benefits of owning your business premises through your SMSF.
Trust deed management – changing SMSF legislation and strategies require proactive trust deed management. The Trust Deed (the SMSF’s governing rules) should be updated as needed to keep up with these changes.
Comparing costs and benefits of SMSF vs industry super
One of the main potential drawbacks of an SMSF is the set-up and management cost. Your super balance is one of the factors to consider when making a decision. In the past, ASIC recommended a balance of $500,000 to justify establishing an SMSF. But this advice was scrapped by the agency that noted that the balance was only one factor in choosing to set up an SMSF.
Research conducted by researcher George Mihaylov of the University of Adelaide and SMSF Association chief executive John Maroney showed that the investment performance of SMSFs with balances of more than $200,000 was on par with that of much larger super funds. So you don’t necessarily need a large super balance to justify starting an SMSF.
Your choice on whether to take the SMSF path will be determined by your retirement income planning strategies and the potential self-managed super fund benefits. For example, if you want to access more investment options.
SMSF management best practices
Whether you decide to manage your SMSF yourself or get outside assistance, here’s an overview of best practices for SMSF management.
Lodge the fund income and SMSF annual tax return on time with the ATO each year.
Undertake valuations to complete the SMSF’s financial state and annual return.
Use the services of an approved auditor to complete an annual audit to maintain legal compliance.
Meet standards under SMSF regulations to accept super contributions. The SMSF trustee is responsible for ensuring the fund can accept any particular contribution.
Notify the ATO if there are any changes to fund details within 28 days. These can include contact details, addresses, and names of members and trustees.
Keep proper and accurate tax and superannuation records for effective and efficient fund management.
Complete a Rollover Benefits Statement when a rollover from an SMSF occurs, providing copies to the relevant member and receiving fund.
Make benefit payments to members as a trustee. In most cases, these can be paid as a lump sum of an income stream.
Withhold tax as part of Pay-As-You-Go withholding when a taxable benefit is paid to a member. PAYG withholding occurs most commonly when a member is under 60 and receives an income stream or lump sum member benefit.
Get in touch to discuss your SMSF questions
At Lanteri Partners, we’re specialist advisors providing a range of services, including private wealth management, estate planning and SMSF advice.
SMSF advice is also a specialty area for Lanteri Partners. SMSFs are a complex area of financial planning, and it's important to have expert advice to ensure compliance with regulatory requirements and to maximise the benefits of this type of fund. Lanteri Partners can assist with setting up and managing SMSFs, including compliance with the ATO regulations, investment strategy, and ongoing administration.
At Lanteri Partners, we can help you achieve your financial goals regardless of whether you choose to use an SMSF or a traditional superannuation fund. Contact our team to learn about the strategies we employ for our clients and how we can help you achieve your financial goals.
1. https://www.afr.com/wealth/superannuation/asic-dumps-500-000-smsf-threshold-20221209-p5c516
2. https://www.professionalplanner.com.au/2022/02/performance-of-200k-smsfs-on-par-with-apra-regulated-funds-research/