SMSF Series Part 2 - What to Avoid

Thinking about a self-managed super fund? Here’s the second part of our three-part series on the benefits of running one (you can see Part 1 here).

From the outset, we strongly recommended engaging a professional to assist you with deciding on, and setting up, your SMSF. Because there’s no shortage of bad decisions you can potentially make when it comes to your money, from your tax return obligations to the managing of your SMSF. Here are a few we see all the time that you should avoid.

1. Not having enough money.

Some people try to start an SMSF to buy or speculate in a certain asset or asset class. Unless you have around $100-200,000 that can be combined with other family members or your partner, it’s probably not worth starting a fund.

• 2. Gambling with your money.

Your superannuation fund is there as a cushion for when you retire. It’s not there to gamble or day trade. Yes, it’s possible to use it to buy Bitcoin and trade shares, however, it needs to be consistent with a written investment strategy. If your fund isn’t capable of paying at least the minimum pension during retirement age, you may be compromising your future.

• 3. Mixing the money.

You can’t mix your personal money with your SMSF money. It’s important to keep separate bank accounts and set personal assets apart from the assets of the fund. If you don’t, it gets murky, fast, and you’re potentially setting yourself (and other fund contributors) up for some significant penalties when you file your SMSF tax return or if the ATO discovers a breach.

• 4. Not buying assets in the right name.

Further to the previous point, when you purchase assets, it’s paramount that you buy the asset in the correct name, otherwise it may create a capital gain or stamp duty event to change the beneficial ownership.