All decisions and responsibilities for managing the SMSF rest with the trustee. This means they are ultimately responsible for:
- the operation of the fund,
- its investment performance,
- complying with the superannuation laws, tax laws and the governing rules of the SMSF, and
- meeting lodgement deadlines.
Since the trustees are generally the same people as the members, this means individuals with SMSFs are taking on these responsibilities themselves.
Whether this also involves a lot of work and therefore takes a lot of time will depend on how much of this work is outsourced. It is usual for trustees to appoint an administrator (or accountant) to prepare the SMSF’s financial statements, arrange and/or perform the audit, ensure compliance with superannuation law/tax law/governing rules and lodge returns. Trustees may also choose to appoint a financial advisor to assist with investment decisions and/or a broker to buy/sell securities.
Regardless of whether professionals are engaged to assist with the operation of the SMSF, the trustees are ultimately responsible for the SMSF.
If the account balances in the SMSF are small and do not grow quickly, the fixed costs associated with running the SMSF can mean that the SMSF is a more expensive option than a non-SMSF.
3. Limited Ability to Diversify
Because of their economies of scale, large retail, industry and wholesale superannuation funds are often able to access certain investments unavailable to SMSFs or at a cheaper rate than those offered to SMSFs. This may lead to an inability to diversify investments for some SMSFs (e.g. SMSFs with smaller overall account balances), although more investment products are being developed in investment markets to alleviate this problem.
4. Lack of Compensation Scheme
Members of non-SMSFs have access to compensation arrangements in the event of fraud or theft. Members of SMSFs do not have access to these compensation arrangements on the basis that they are usually also the trustee of the fund and therefore responsible for all operations of the SMSF including the investment decisions made. Other avenues for compensation are available to SMSFs, but these are limited to taking action against service providers etc.