For the past couple of years, SMSFs have gained much attention among people who want a stable retirement. However, with the growing popularity of SMSFs, otherwise known as Self-managed Superannuation Funds, a lot of misconceptions are circulating among the public as well.
Since these are self-managed, you are responsible for all the management decisions, insurance and investments. These responsibilities, paired with the myths in the public, scare off a lot of individuals.
So, here are the four most prevalent myths that need to be busted today.
1. Too Risky for An Individual
According to self-managed super fund rules set by the ATO, SMSFs are wholly managed by the trustee. Unlike retail and industrial superannuation funds, there is no fund manager to make investment decisions.
Since many people dive into SMSFs without appropriate knowledge, they have concluded these funds to be extremely risky. SMSFs are regulated by the ATO, and any minor mistake can impose a plethora of penalties.
However, naming them risky for everybody is wrong. You can always seek professional guidance to learn more about them. All you have to do is be responsible and aware enough to fulfil your duties regarding SMSF, and you shall be on for a safe ride.
2. SMSFs Can Help You Buy Property in A Simple Way
As a trustee of an SMSF, you can decide to buy an investment property as part of your portfolio. But it is more complex than it seems. You will have to face several challenges if you choose to acquire a property through this fund.
For residential property and SMSF, it is clearly stated that you cannot enjoy any benefit from this property of any sort. You cannot reside in the properties purchased using SMSF, nor can these be rented. Moreover, no other trustee of your SMSF can do the same.
3. SMSFs Are Only for Retirees
While looking at the data of the previous decades, this could have been considered a truth. However, the dynamics today have changed significantly. So many relatively younger people have taken an interest in these, and this number has been increasing continuously.
For the financial year of 2022, people from the age group 35-44 years old accounted for 30% of the total trustee. It may be due to the greater control SMSF offers over your retirement. It has been understood by a significant number of people that the earlier you start planning for retirement, the better.
4. You Must Be Wealthy to Have An SMSF
A lot of people believe they can’t have self-managed super funds because they are not rich enough. If you have been studying SMSF, you must have come across this myth. However, according to ASIC or the Australian Securities and Investments Commission, no minimum balance amount is mandatory.
While there is no compulsion of a specific balance, having a large opening balance is always recommended. It can be around $200,000, and the reason behind this recommendation is the involvement of administration fees and compliance fees to manage SMSF.
So, there is no amount set in stone for opening an SMSF. You can talk to an SMSF advisor, like Clear Tax Accountants in Melbourne, to have an even clearer idea about this.
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