I have $1.1 million in assets. Would a self-managed super fund suit me?

I am 59, and planning to retire in five years. I hold $500,000 in shares and have $600,000 in super. Could you comment on whether my circumstances make self-managed super a viable option, and also whether I can transfer my existing shares into a newly set up SMSF?

There are two elements here. Can, or perhaps more appropriately should, you transfer to a self-managed super fund (SMSF), and then whether you can transfer existing shares into an SMSF.

Let’s get that second piece out of the way first. You can make contributions into self-managed funds through what is known as an in-specie transfer. This means a transfer in a form other than cash.

You would transfer your shares into the SMSF, and they would be accounted for as though they were a cash contribution. You must operate within the contribution caps. Here, the most relevant would be the non-concessional cap, which is $120,000 annually with the potential to make three years’ worth of contributions in a single year.

Note that in moving your shares into your SMSF, you are disposing of the shares in your personal name and therefore triggering a capital gains tax assessment. It may be possible to make tax-deductible super contributions to help offset this. Certainly, it is something to explore with your financial planner.

Now let’s talk about the move to self-managed super. There is no legislated minimum required to start an SMSF. The cost to establish an SMSF is typically about $3000 to $5000. It must then have an annual return and audit done, which will cost about $3000 per year.

Too often I see people who overestimate their ability to manage money because they got lucky picking a share or two.

Unless you possess the requisite skills to manage this large pool of money, you will likely also need the services of a financial planner, and so their costs would be in addition to the accounting expenses. From a cost perspective, self-managed funds become more attractive the larger your super savings. In most cases, super balances north of $1 million will make sense.

Reflect on your reason for establishing an SMSF. If it is because you want to hold direct shares or exchange-traded funds (ETFs), you could achieve this outcome using a wrap service with far fewer headaches. This could also be your solution if the reason is you intend to be more involved with your retirement savings.