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Key Benefits of an SMSF

Olivia Long
April 2, 2020

Self Managed Super Funds otherwise known as SMSFs are a growing, popular and significant sector in Australia’s superannuation industry – and here’s why!

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Self Managed Super Funds otherwise known as SMSFs are a growing, popular and significant sector in Australia’s superannuation industry – and here’s why!

Benefit 1: You can be more engaged with your super

Let’s face it. Many of Australia’s superannuates have little understanding what their superannuation balance is or even how their superannuation is performing. For many, super in general continues to be ‘the great mystery’.

One of the key benefits of running an SMSF is you can be more engaged with your retirement savings. SMSF trustees are accountable for the running of their fund. As a result of increased attention and engagement SMSFs can outperform other super products.

Benefit 2: You have complete control over the decisions made in the fund

As a trustee of your own fund, you have complete control over the decisions made in the fund.

  • You choose when, how, what you want to invest your money in;
  • You have access to a wider range of asset classes not available in public or industry funds (direct property, collectables, private companies or unit trusts);
  • You can have a portfolio tailored to suit your specific needs;
  • You can select an Investment Adviser to partner with you or make decisions on your own;
  • You can react more quickly than super fund managers or institutions to financial market fluctuations.

Benefit 3: SMSFs are one of Australia’s most tax effective vehicles

Members in accumulation mode are subject to 15% tax and members in pension mode enjoy an entirely tax-free environment on balances up to the pension cap which is currently $1.6 million. Further, by structuring your investment portfolio, you have the ability to access franking credits – and if in pension mode – you may even enjoy a tax refund each year from the ATO for excess imputation credits.

Benefit 4: SMSFs can accept ‘in-specie’ contributions

These allow members to not only contribute cash to their SMSF, but also other investments you may hold personally such as listed security and ‘business real property’.

For those in the highest income tax bracket, the benefits of a 15% tax bracket or even better, the tax free environment a pension fund provides is a significant reason to establish a self managed fund.

Benefit 5: SMSFs offer flexibility over pensions

You have the ultimate control and flexibility over the payment of pensions as the Trustees have direct control over the bank account.

Unlike some superannuation vehicles, you can move from accumulation mode to pension mode without the need to sell down assets and realise capital gains. In an SMSF you can benefit by running multiple pensions within your fund maximising strategic tax planning opportunities.

Benefit 6: SMSFs can benefit from borrowing strategies

As they allow you to increase the overall amount for investing within the superannuation environment.

Benefit 7: SMSFs can benefit from inter-generational transfer of investments & contribution splitting

They provide control and flexibility over estate planning, enabling members to ensure investments transfer from members to their beneficiaries in a tax effective manner. Further SMSFs provide the flexibility of splitting contributions between members which is more important now than ever with the introduction of the transfer balance cap.

Benefit 8: SMSFs can provide cost savings

And for some funds, running an SMSF can actually be most cost-effective than other superannuation vehicles. Even better – your children can utilise the SMSF for their superannuation savings splitting the cost

Benefit 9: Being in control of your retirement savings is fun

And many SMSF trustees enjoy the role they play in their financial future.

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