Managing an SMSF

Australia now has close to 600,000 Self-Managed Super Funds (SMSFs). With member balances representing roughly 30% of the $2.3 trillion balance of Superannuation assets, we look at some of the challenges managing an SMSF and provide some advice on how to make it easier.

Whilst an SMSF can provide great flexibility for its members, many trustees find themselves neglecting their obligations after the initial excitement wears off. Trustees should ensure they receive a level of advice and service they require to diligently meet their obligations.

So, what are some of the more common issues with running a SMSF?

1. Neglecting the investment portfolio

This is a core role when managing an SMSF. Members often take control of the assets held by the fund initially then show less and less interest in managing the portfolio as the years roll on. The repercussions of this neglect are very damaging to the long-term performance and can translate to a much lower retirement balance. As a trustee you should ensure that:

• You have a documented plan! Ensure you have an investment strategy and that you stick to it. This should include the types of assets you will invest in, a detailed and well documented understanding of your asset allocation strategy including how often you should rebalance your portfolio.
• You start with the end in mind. Have a good understanding of how much you need to retire – you can base this off your current level of spending or an estimated budget post retirement. Your retirement savings goal should dictate the decisions you make leading up to retirement.
• Ensure you revisit your cash balanceat least quarterly – your portfolio should be paying regular income through dividends, distributions, rental payments or interest and the cash balance should be re-invested in accordance with your investment strategy.

2. Minimise the cost of managing your SMSF

New financial products become available every year and with increasing variety comes lower costs. Ensure the investment products and the investments you make are competitively priced. Even a small change to the annual investment fees paid by the fund can make a huge difference in retirement.

Ensure your accounting and audit fees are competitive. There is a huge variety of solutions available, from accounting and audit to daily management of the fund’s portfolio. While outsourcing full management of your SMSF may not be for you, most accountants now use smart technology to ensure you have clarity, tools and insights that you need to make the right decisions.

3. Take steps to reduce administration

We believe SMSF administration should be easy, not time consuming. Take steps to ensure that management of your SMSF isn’t an endless source of administration. Ensure you have the organisation and financial products that minimise day to day admin. Work with your accountant, financial adviser or stock broker to ensure you have a streamlined solution that operates efficiently.

4. Ensure the compliance element is well taken care of

As an SMSF trustee it’s your responsibility to ensure the fund plays within the rules. At times that can be challenging, especially as rules change. You need to ensure that the funds trust deed reflects the changing landscape. There has been (and will likely continue to be) a multitude of legislation changes, tax determinations, rulings, ATO guidance and court cases that will impact the operations of an SMSF.

An SMSF Deed isn’t a ‘set and forget’ document. Your deed should be reviewed regularly and, where required, updated to ensure it reflects best practice. Updating a trust deed needn’t be an expensive exercise and most good accountants can arrange this on your behalf.

Finally, remember that the quality of advice you receive shouldn’t be determined by the quality of your questions.  ‘You don’t know what you don’t know’ can be a dangerous thing. Seek advice from professionals to ensure your SMSF is working as hard for you as possible.

At Satori Advisory we understand that paying the right amount of tax and not a cent more means more disposable income in your pocket. Our accountants will ensure you’re doing just that AND help structure your accounts and/or business to maximise your income. Additionally, when you use Satori Advisory myVAULT to automatically collate your expenses, your time in managing your tax records is minimised, freeing you up to focus on what what’s really important to you. Give the team a call and re-discover your freedom.

The Accounting team are on 1300 925 081 or info@satoriadvisory.com.au