SMSF pro con

https://www.bottomlinecontrol.com.au/info/smsf-vs-industry-fund-which-is-the-best-option-for-your-superannuation#:~:text=SMSF%20members%20make%20all%20investment,'t%20choose%20specific%20investments).


AdvantagesDisadvantages
  • Range of investment options.
  • Transparency.
  • Flexibility when it comes to accumulation and pension accounts.
  • Consolidation of superannuation assets.
  • Flexibility when it comes to estate planning.
  • Value adding to your super through property.

  • Visibility, Control and know exactly your investments
  • pool your family/spouse super contribution
  • It takes over 100 hours a year to run SMSF (around 8.4 hours a month).
  • You must remain up-to-date with all superannuation law changes yourself. Time and knowledge
  • You must meet all your reporting obligations including financial statements, tax returns and independent audits. 
  • You must organise yourself any annual valuations of assets if and/or when required.
  • It costs around $13,900 a year to run a SMSF.
  • Residential properties can not be acquired through SMSFs with the intention to be lived in nor rented by a member, their family or their associates.
  • Personally liable. You could face fines or end up in court if assets are misused, as your SMSF and its assets must be used only to provide benefits to members for their retirement. Fines and court appearances can result from:
    • Take money out of the SMSF before you are entitled to and spend it e.g. on a car or home loan repayments.
    • Use or access any collectables the SMSF invests in (e.g. art or wine).
  • Exercise caution when investing decisions
  • exit of one member can be complex.
  • if a member dies, another member takes over and act against their wishes.
  • if you transfer your entire industry/retail balance to your smsf, you lose favourable insurance conditions


Remember, SMSFs with balances below $500,000 have, on average, lower returns after expenses and tax compared to industry and retail super funds. On the other hand, SMSFs with balances above $500,000 have returns that are competitive with industry and retail super funds after expenses and tax. Therefore, if your balance is below $500,000 and an adviser has suggested that a SMSF is the most suitable option for you, ask why this is the case. - ASIC


Industry superfund



  • Low fees.
  • All profits are put back into the fund for the members to benefit from.
  • Usually open to everyone.
  • Run by industry associations and members.
  • Not-for-profit funds.
  • Compliance risk is borne by the professional licensed trustee.

  • Limited number of investment options.
  • Less individual freedom when it comes to choosing specific investments for yourself.
  • more costly for high balance funds



Differences

There are a few differences between SMSFs and industry funds including:

  • A SMSF can have a maximum of 4 (four) members, whereas industry funds generally don't have a limit.
  • Compliance risk is taken on by SMSF members, whereas compliance risk is borne by the professional licensed trustee for industry funds.
  • SMSF members make all investment decisions and implement any investment strategy that their fund has in place, whereas industry funds generally only allow its members to have basic control over the mix and risk level of super investments (ie. you can't choose specific investments).
  • Insurance is a choice and can be purchased for SMSF members, but it tends to be higher in cost than other super funds. For industry funds, insurance is usually offered to cover to members that costs less, as large funds can get discounted premiums.
  • SMSFs are regulated by the ATO, whereas industry funds are regulated by the Australian Prudential Regulation Authority (APRA).
  • SMSF members deal with the ATO directly, whereas industry fund members generally don't deal with APRA directly.
  • When it comes to disputes, SMSFs must use a dispute resolution process or the courts to resolve an issue, whereas industry fund members have access to the Australian Financial Complaints Authority (AFCA).
  • Industry fund members may be eligble for statutory compensation in relation to complaints and/or disputes, however SMSF members do not have any government compensation scheme available to them.
  • If there is fraudulent conduct or theft, no government financial assistance is available to SMSFs however members may have legal options under Corporations Law. For industry fund members, members may be eligible for government financial assistance in the event of fraud or theft.



SMSF Myths

https://www.hrblock.com.au/tax-tips/top-smsf-myths



You need to be wealthy to have an SMSFAccording to the Australian Securities and Investments Commission (ASIC), there's no mandatory minimum balance needed to open a self-managed fund. In saying that, it is recommended you have a large opening balance; a figure of around $200,000. It's worth mentioning this guide exists for a reason as there are administration and compliance fees involved in managing an SMSF. For funds with low balances, it may not be worth it.
SMSFs are too riskyWhere retail and industry superannuation funds have fund managers who generally make investment decisions on behalf of the fund, self-managed super funds are managed by their trustees. With the responsibility sitting on your shoulders, there's an element of risk when making complex financial decisions. Much like other investments, balancing risk and reward comes down to getting the right advice and making smart choices.

To reduce your risk, always seek professional advice and make sure you regularly review your investment strategy to factor in diversification, liquidity, solvency and insurance requirements of the fund.
SMSFs are simple ways to buy propertyWhile trustees of an SMSF can choose to purchase an investment property as part of their portfolio, it's not as simple as it sounds. Acquiring property through a self-managed super fund is more challenging to manage and regulate than an independent property investment.


Avoid traps

https://www.macquarie.com.au/investing/cash-management-account/smsf-toolkit/is-an-smsf-right-for-you.html

The biggest mistake Kitto sees people make is to attempt to do everything at the lowest possible cost.

“All things being equal, an SMSF actually should cost a bit more, because you’re getting extra flexibility,” he says.

For example, investing in the right trust structure from day one can help you avoid the risk of significant legal costs and complications later. At some point you might want to access a property loan through a limited recourse borrowing arrangement, or need to exit one member following a relationship breakdown6  and having an appropriate trustee structure may assist with these changes as they arise.

“It might be cheaper to start your SMSF with two individual trustees rather than a company trustee, but in the future there’s likely to be a situation where you need to change that – and that will cost more in the long run,” Kitto explains.

He says an SMSF administrator can do a lot of the heavy lifting from a compliance perspective and provide the accounting and taxation guidance an SMSF needs on a regular basis.

“Then you can pull in other professionals as needed – financial advisers, lawyers, mortgage brokers, specialist tax advisers. It can be very powerful for your SMSF to bring those experts in for specific opportunities or life changes, so they can work together for your mutual benefit.”