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SMSF – Your questions answered, day four – what are the costs?

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So you know that SMSFs allow for greater control over your investments and assets but what about the costs and risks? Not to put a dampener on your dreams but there a few biggies. The ATO advises that a competitive and viable SMSF should have around $200,000 in super savings. Ongoing costs for an average fund is $2000 yearly, including the $150 annual supervisory levy. In addition, you’ll need life insurance, which can be comparatively more expensive than the large funds (which buy group policies in bulk, lowering the cost to its members).

The bottom line is the costs of establishing and managing a SMSF varies greatly depending on the cost of accounting, tax, auditing and legal help you obtain. If you’re pouring your super savings into a SMSF, you’ll be at a disadvantage if you manage the administrative aspect on the cheap. If you aren’t an expert, these can be essential in keeping your fund profitable and compliant. For my SMSF, I employ a small army of professionals to help me stay on top of things, including the priceless advice of an accountant and a financial adviser.

One thing to remember – definitely don’t do it simply because you’ve heard it’s a cheap option!

Like all things worth having, a little bit of elbow grease and a smart strategy can help turn risk into reward. Remember that the fees for professional advice can be heavy but the rewards are priceless.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Thursday, December 23, 2010

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