SMSF Series Part 2 - What to Avoid

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8 mistakes to avoid when running a self-managed super fund

Part 2 of a series on SMSFs

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.

Blue piggy bank and calculator
  • 5. Living in a property.
You can’t live in or rent a residential property to a family member. That’s counter to the rules of an SMSF. You can own, and your business can rent a commercial property, and it’s a key reason many business owners have an SMSF in the first place.
  • 6. Accessing the money.
Even when times are tough, you’re not allowed to access your money inside the SMSF unless under very specific circumstances and often only just for a short time to pay bills or meet obligations. Generally, accessing your SMSF is the same as accessing your super — you must be of a certain age and retired.
  • 7. Not submitting your SMSF details correctly on your tax return
When used correctly, an SMSF can lower your taxes. This means if you lodge it incorrectly, you’re potentially undoing all that hard work. To get the maximum possible benefit, it’s important to be savvy about the taxation and legislation requirements and to have very robust record-keeping in place.
  • 8. Having the wrong team.
It’s paramount to the success of your fund, and ultimately your retirement, that you have the right advisors on your team for when you have questions that will affect your future. Armed with the right support, an SMSF can be hugely beneficial, but you must partner with people who understand the taxation and legal implications, and treat your money with respect.

If you’re thinking about setting up an SMSF and need some help, you have one and need some assistance with your tax return, or you have another SMSF accounting question, simply provide a few details below.

We’ll work out if you need an accountant or financial adviser to step you through all the ways to reduce your tax and boost your super! We’d love the opportunity to help you or just answer some questions for you.

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