What type of fund do you have?

What type of SMSF do you have - a DIY or SMSF ?

Having worked in the SMSF industry for some time we have found that there is a wide range of SMSF clients - those that want to do everything themselves (the DIY'ers), the SMSF’ers and those that are happy to build their fund into a strong, strategic Enduring Family Super Fund.   Let’s have a look at each of these types of small four member’s superannuation funds:

The DIY super fund and the SMSF

1. DIY superfund

This is a super fund where there is a strong hand’s on  “I’ll do it all” focus by the trustees of the fund.   The trustee generally does the accounts of the fund using an accounting program such as MYOB.  All bank reconciliations, income receipts and expenses are accounted for and the management of the investments are undertaken by the trustee. Due to the complexity of the superannuation and taxation laws the trustee will need an accountant to compile the tax return and must have an independent audit under the SIS Act 1993.  Unless the trustee only holds limited or simple property investments, there is a lot of work that must be done by the trustee – for a trustee trading shares it is a full time job. 

Of course once the fund goes to pension mode with the trustee ideally running a simple but strong SMSF strategy of a retirement accumulation account alongside for any surplus superannuation benefits the DIY fund will be left behind.  The use of reserves, multi-generational reversionary pensions and other important but simple SMSF strategies are a rarity to all but family super specialists.  The cost to the family for those running a DIY super fund can be enormous in lost benefits and higher costs including tax.

2. Self Managed Super Fund

This is the next level above the DIY superannuation fund and one that the majority of SMSF’ers run.  Again the focus is on investments but the trustees of a SMSF generally have the advantage of tax and superannuation advice from their accountants and financial planners.  Strategy in a SMSF may be around pensions, estate planning, maybe some insurance and taxation strategies.  The strategic input will depend on the SMSF skills of the advising professional or accountant and the willingness of the trustee to learn and enquire what is possible within their fund.  In many cases the strategies if not understood will be ignored at the peril of those in the SMSF.  Given the complexities surrounding super we find that it is not unusual for SMSF trustees to not fully appreciate or understand the laws.  This is not a value statement on the trustee, but like all professional fields of experience (practical) is paramount, so unless someone is “in the space”, then it is complex.