Benefits of SMSFs

An SMSF can provide many benefits but the biggest advantage is that you have greater control over your own retirement savings. You can develop your own investment strategy and make all the important decisions on what investments to make and when to buy or sell those investments.

There is an extensive choice of investment classes including

• bonds
• direct property
• managed investments
• listed property trusts
• direct listed shares
• listed investment companies
• exchange traded funds
• derivatives
• foreign currency trading

Tax concessions for superannuation products, including SMSFs

• Earnings are taxed at a rate of 15% while in Accumulation mode, or 0% when in Pension mode. Please note that recent proposed changes may result in tax applying in Pension mode as well.
• Capital Gains made on the sale of investments which have been held for greater than 12 months are taxed at an effective rate of 10%.
• Contributions made into the fund which are before tax (deductible) are taxed at a concessional rate of 15%.
• Subject to recent proposed changes, the amount of Capital Gain Tax (CGT) may be reduced by deferring the sale of assets until the fund enters Pension mode..
• There are also other strategies available to help reduce the tax liability payable by your SMSF.

Holding Business Real Property

Your SMSF may be the perfect structure to hold direct property. An SMSF offers

• tax effectiveness
• asset protection
• succession planning
• security of tenancy

Why pay a landlord rent when you could use this money to increase your own wealth to be used in your retirement. By using the funds already saved in super you could unlock investment potential in property and use this property as part of your business operations resulting in investment growth and rental security.

Flexibility of Investments

Since members are also the trustees who control the actions of the fund, this allows investments to be actively managed and any changes can be made quickly to respond to either changes in financial markets or the changing needs of the members. There is no disconnect between members & management. Changes happen instantly and this hands on investment approach means things happen when you want, not when it suits someone else.

Having an SMSF also enables members to invest in assets which may not be available through other superannuation products such as direct property, unlisted shares, unlisted unit trusts or other not so common investments like gold bullion bars.

Affordability of Low Fees

An ATO report titled Self Managed Super Funds: A Statistical Overview 2011-12 showed that 74.2% of SMSFs spent 1.5% or less on operating expenses. This shows contrary to popular belief that SMSFs can be an effective and cost effective superannuation investment vehicle.

"The majority of SMSFs had an estimated operating expense ratio of 1% or less (65% of SMSFs in 2012), the highest proportion (41%) of which had an estimated operating expense ratio of 0.25% or less" (ATO: Self Managed Super Funds: A Statistical Overview 2011-12 Report).

If you have never thought about what your current superannuation fund is costing you, spend the time to check… you might be surprised!

Pooling of Resources

A unique feature of an SMSF which is not available in other superannuation arrangements is that an SMSF can have multiple members (up to four). This allows for each of these members to rollover other superannuation balances or make additional contributions to their new SMSF and combine their total funds to invest for their retirement.

This can provide for more effective investment options and also allow for the possibility of reducing costs due to better economies of scale.

It also provides a good option for people to pool funds to invest in big-ticket assets like direct property which may have otherwise been unobtainable. This combined with the ability of an SMSF to utilise limited recourse borrowing arrangements which are not available in other funds opens many new and exciting possibilities.

Flexible Estate Planning

Another bonus of having a SMSF is that it allows members to use estate planning strategies to effectively manage tax liability and maximise asset protection when passing wealth between family generations.

General Advice Warning

The information on this site is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs, and seek financial advice where necessary.