You may have heard the about Self Managed Super Funds or SMSFs and how good they are.
But do you really know the specifics of why they are good? And whether or not an SMSF can benefit you?
It’s true that a Self Managed Superannuation Fund (SMSF) can provide a significant amount of benefits. However, you may not be in a position to take advantage of the benefits.
Setting up and running a SMSF will incur costs and require you to take on significant responsibilities.
If you are willing to take a more hands-on role with your super and inherit the responsibilities, an SMSF can provide benefits in relation to investments, estate planning, taxation, administration, and potentially lower fees.
Benefits of a SMSF – Investments
1. Investment choice not limited by an investment menu.
2. Can purchase real direct property (commercial or residential).
3. Investment choice only limited by legislation and the SMSF Investment Strategy and Trust Deed.
4. May be able to utilise borrowings to purchase investments
Benefits of a SMSF – Estate Planning
5. Can make Non-Binding or Binding Death Benefit Nominations.
6. An SMSF is a continuing entity meaning it never has to be closed down. This means the SMSF and assets of the SMSF can be passed on through generations.
8. Death benefits can be paid as a lump sum, an income stream or a combination of both (subject to legislation)
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Benefits of a SMSF – Taxation
9. You are able to actively manage the buying selling of assets to manage your CGT position. Other funds may buy and sell assets at will to fund expenses, which could result in CGT being applied to your account.
10. You do not inherit CGT within a SMSF. For example, if you were to rollover your savings to an industry fund and the next day they sold a large asset with large capital gains, a part of that tax would be applied to your balance, despite you not directly benefiting from the growth of the asset.
11. You can choose to invest in direct shares that have a high level of franking credits.
12. You can change from accumulation phase to pension (drawdown) stage without selling any assets. Then, once in pension phase (which is tax free), you can sell assets with large gains and potentially pay no CGT.
Benefits of a SMSF – Administration
13. There is more flexibility around how and when you commence an income stream.
14. Transactions in and out of the SMSF can be made on the same day if need be (depending on bank transactions). For instance, if you want to get a last minute deductible contribution in on 30 June. Unlike other funds that generally have a 3-4 day time-frame.
Benefits of a SMSF – Fees
15. Fees associated with establishing and maintaining a SMSF are generally flat fees (i.e. not percentage based). Therefore, you have certainty of costs and are not ‘penalised’ for having a higher account balance. In many cases, a higher balance will actually result in lower fees than a retail or industry fund.
16. Investment fees may be $0 if you manage your own portfolio such as a share portfolio or commercial property.
If you would like anything clarified or have any further questions about Benefits of a SMSF or any other topics, please do not hesitate to leave a comment .
