The Real Benefits of SMSF.

Your friends or your accountant urge you to start your own Self-Managed Superannuation Fund (SMSF).  While you do trust your friends’ intentions and your accountant’s professionalism, you have a nagging doubt about the idea.  On the one hand, you are very much attracted to having your own SMSF but… you are not sure.  In this and several following articles, we will give you some further food for thought.

There is no doubt that an SMSF is not for everyone because there are responsibilities as well as benefits.  So, over the next little while we will write about both the benefits and the responsibilities and of course if you want some further thoughts you are very welcome to contact us with any questions.

We will start with the benefits of having your own SMSF and in later articles, we will discuss your responsibilities, some estate planning opportunities (didn’t your friends mention these?) and then the things you need to do to get started and to manage your fund.

You may not be aware but the benefits of having your own SMSF are more psychological than financial!  People will tell you about tax benefits- and there are many – but the benefits of SMSF are really based on control and flexibility.

SMSF Benefit – Control

As trustees of your fund, you have greater control over your investment strategies which should relate to your life goals and objectives rather than some vague notion of ‘beating the index’.

You have greater control over whether your contributions will be tax deductible or not; there are reasons why you might not want to claim a tax deduction particularly in relation to estate planning in your fund.

You have control over where your assets are invested.  You have control over whether your fund borrows money to purchase large investments such as property. Whether you invest in overseas share and bond markets. And, you have control over when and how you convert your assets to income streams.


SMSF Benefit – Flexibility

To exercise this level of control you must have more flexibility than is offered by government, industry or retail superannuation funds.  You must have greater flexibility:

  • In your choice of investments.  SMSFs provide more investment options than any other super fund. Trustees can access direct shares, high-yielding cash accounts, term deposits, income investments, direct property, unlisted assets, international markets, collectables and more.
  • On whether you want to borrow money to invest – legislation allows SMSFs to borrow funds to purchase a single asset (e.g property) or collection of identical assets that have the same market value. This ability is particularly valuable where you are in the younger age group eg 40’s or early 50’s.
  • In sort of tax strategies, you might want. Like all super funds, SMSFs benefit from concessional tax rates. In the accumulation phase, tax on investment income is capped at 15 percent. However, in the pension phase, there is no tax payable, not even capital gains tax. Further, you might want to set-up a ‘Transition to Retirement’ strategy where you convert some assets to a pension while still working and contributing either the compulsory contributions or a salary sacrifice arrangement.
  • In starting income streams. You can even have multiple members running a mixture of accumulation and pension accounts. Or several pensions if that is a better tax strategy.

However, above all else you have transparency.  You know what is happening to your superannuation assets because you are in charge. SMSFs offer significant transparencies that allow trustees to align their personal goals with their investment decisions.  They also allow the members to better understand where money is invested, with complete visibility over performance, tax treatment and what happens to their superannuation when they die (they are not dealt with by your Will!)

This is quite a simplified version of the things you can do in your own SMSF.

For more information call us on 0417389483 (Russell) or 0419363701 (Ken)


Moneta Super the SMSF Specialist

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