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Self Managed Superannuation Funds: What are the Disadvantages?

What are the Disadvantages?

While an SMSF can offer greater opportunities to take control of your retirement savings, there are some potential disadvantages you should also consider:

Considerations Background and Explanation
1. Higher Costs for Lower Balances Although SMSFs generally only become cost-effective if the fund has $200,000 or more invested, especially if you outsource and pay for most or all of the fund administration. However, if you want to invest into direct property, an SMSF is the only vehicle for super funds.
2. Greater Responsibility When you set up an SMSF, you and any other fund members will generally need to be trustees (or directors of the corporate trustee) and will be responsible for meeting a range of legal and other obligations
3. Harsh Penalties for Breaches The Australian Tax Office has the authority to impose various treatments to deal with SMSF trustees who have breached super laws. These include:

  • requiring trustees to complete certain educational requirements within certain timeframes
  • disqualifying an individual from acting as a trustee or director of a corporate trustee
  • imposing significant administrative penalties on individual trustees and directors of corporate trustees of up to $10,200 per breach
  • applying through the courts to impose civil and criminal penalties, and
  • giving notice to a trustee to freeze the SMSF’s assets where it appears that their conduct is likely to adversely affect the interests of beneficiaries.
    Setting up a Corporate Trustee helps minimise any penalties.
4. Time Consuming You will need to have enough time, knowledge and skills to manage your own super and meet your legal and other obligations.
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