By taking control of your super through a self managed super fund (SMSF) you can expect to enjoy numerous benefits. To grow your retirement wealth, there is little doubt that a SMSF is the most flexible retirement vehicle of choice. The fundamental driver of this growth has been the desire of individuals to gain greater control over their investments, rather than leaving it to fund managers.
The key driver of SMSFs has always been investment control. Your choice of investments can be tailored to suit your specific needs and the trustees have the flexibility to make changes to the SMSFs investments quickly and easily. There are an extensive range of investments available to choose from (subject to SMSF rules), including investments not always available in other types of commercial funds, such as investment properties, collectibles and shares in unlisted companies and unit trusts. The SMSF assets are totally under the control of the trustees who are responsible for making all decisions on where to invest their own funds.
At fifteen per cent, SMSFs have one of the lowest tax rates of any entity in Australia and with strategic planning this can be reduced even further by offsetting other tax credits (such as maximising franking credits). With the right internal structuring and planning, tax can be significantly reduced and in some cases totally eliminated, particularly for those in retirement phase. As an SMSF trustee you have the flexibility to recognise and manage the tax effect of investment transactions on individual member accounts. By contrast most other types of super funds provide little scope for a particular member to influence tax outcomes in relation to their investment choice. Additionally, as trustees move towards the retirement phase, there are financial planning strategies that can be implemented to help reduce their tax burden.
The use of Limited Recourse Loans allows trustees to gear investments in their SMSF, where this strategy has limited application in larger commercial super funds. Shares, property and any assets that can ordinarily be purchased by a super fund can form part of a gearing strategy. This effectively enables trustees access to certain types of assets such as direct property that they may not be able to purchase in full. This strategy can also be useful to small business owners wanting to borrow and lease their business real property (ie. property used by their business) from their SMSF.
SMSFs can allow you to control how your benefits are passed on upon death. With a SMSF, you can build a tailored strategy suited to your family situation and intended beneficiaries with exceptional tax efficiency. This includes being able to leave tax advantaged and sometimes tax free income streams to dependant beneficiaries and to effectively look after child beneficiaries in a way that no other structure can match. A SMSF potentially has an unlimited life span and may continue to provide benefits into the future for members and their dependants.
The cost of running a SMSF (particularly those with larger balances) may actually incur lower fees compared to many larger commercial super funds (depending upon the circumstances). With our fixed cost structure, the administration costs of your SMSF is set no matter what the fund balance is. Commercial super funds on the other hand tend to charge as a percentage of your fund balance, with a range of around 1% to 2% pa depending on the fund and underlying fund managers used. So with our fixed fee for your SMSF administration, the larger your SMSF balance, effectively the lower the percentage cost will be. Compared to most commercial super funds, this becomes very cost effective.