Self managed! The term conjures up images of driving along the coast with the top down and the wind buffeting your toupée – full control of your affairs while everyone else is being dictated to.
Superannuation is what most people would consider a stuffy concept, so prefacing with the words, ‘self managed’, apparently generates greater interest.
But how much self management, freedom and excitement exist with self managed superannuation?
Public funds have an independent trustee administering the fund and following legislative requirements on behalf of the members, with self managed funds this responsibility usually falls to the member as trustee for their own fund.
However, the term ‘self managed superannuation’ is somewhat of an oxymoron because rarely does anyone completely manage their fund.
If funds were truly self managed, that image of the sports car cruising along the coast would be replaced by an uncomfortable office chair and paper stacked up to your ears.
All super funds must lodge tax returns, be audited, form investment strategies and follow a plethora of legislative guidelines, which makes self management near impossible.
In response, most self managed funds have an accountant and financial planner servicing these responsibilities.
Yet given the cost of compliance, a self managed super fund may be expensive to maintain unless it has substantial assets.
Compliance has been an ongoing issue for self managed funds.
Half of compliance infringements are related to the sole purpose test – members/trustees using the fund as an extension of their personal finances.
Clearly temptation exists when access to the assets is so easy, but acting on that temptation is a costly exercise because inevitably the tax office will find out.
The self managed fund is fantastic for some, but inappropriate for others and can turn thoughts of that cruise along the coast into a wild ride, if mismanaged.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. If you want help with your financial future, we think we’re Australia’s top financial adviser. We think we’re the best financial advisers in Tasmania.
