With the ability to invest in a wide range of asset classes and make more timely investment decisions, a self-managed super fund (SMSF) may give you the flexibility and control you need to create a more prosperous future.

As the largest and fastest growing segment of the Australian superannuation industry, many investors are seeing the benefits of holding an SMSF. You have the ability to control your investment choices, creating an investment portfolio that is 100 per cent tailored to the needs of your fund’s members.

It is important to remember with an SMSF that the added flexibility and control brings with it added responsibilities for the funds members, in particular the funds trustees. Firstly, if your fund is not set-up correctly you might not be eligible for tax concessions, which is one of the key benefits of holding assets in superannuation.

Key benefits of a SMSF

Flexibility and control 

An SMSF can give you greater flexibility and choice when it comes to the fund’s investment decisions. As the trustee, you are responsible for setting the investment strategy and asset mix of the fund. Through an SMSF you can access a wide range of investment choices including direct shares, managed funds, property, hybrid securities and hedge funds. Even more exotic asset classes such as collectables (eg art work, antiques, jewellery) can be investments in an SMSF provided you don’t directly benefit from these assets prior to your retirement.An SMSF can also give you more options when you retire. You can pay yourself certain tax-free pensions out of the fund and can execute estate planning wishes far more smoothly and quickly to the nominated beneficiaries in the event of death.

Risk insurance and protection

A requirement of an SMSFs investment strategy is to consider the risk insurance needs of the fund and its members. Premiums paid via super for life insurance, total and permanent disablement and income protection are typically a tax-deductible expense to the fund.

Deciding whether an SMSF is appropriate for you comes down to your superannuation assets, your financial knowledge and the time and effort you’re prepared to put in. It is important to remember that there is help available if you need it. Whether you need day-to-day support with your administration or assistance in setting up or reviewing your investment strategy, one of our financial planners can give you the quality investment advice and support you need.

Tax advantages

SMSFs, like other superannuation funds enjoy the lowest concessional tax rate of 15 per cent. This compares to investments held in your own name, which can be taxed up to 46.5 per cent depending on your assessable income.

Through tailored investment planning, tax can be significantly reduced within the fund and in some cases, totally eliminated. For example excess franking credits can offset other fund tax, such as contribution and investment tax.

Many retail superannuation funds take the 15 per cent contributions tax out immediately on receipt of super guarantee and salary sacrifice contributions, leaving the member to only have 85 per cent of their original money invested, even if franking credits later reduce this amount. With an SMSF you can have 100 per cent of your contributions working for you up until the moment a tax liability is paid.

Estate planning

SMSFs can offer greater estate planning certainty, when the estate planning objectives and beneficiaries have been set out in some type of death nomination. Importantly, contingencies can be put in place should part or all of the original nomination fail. This can be of particular importance for blended families, when a new spouse and children from a previous marriage are named as beneficiaries.

Another area of importance is the ability of the trustee to pay the beneficiary a pension which not all industry, corporate and retail funds allow.

Cost

For those with a superannuation balance of greater than $200k, the cost of running an SMSF can be significantly lower than fees incurred in many retail funds. By being actively involved and by selecting and managing your investments carefully, you can keep the costs you pay to a minimum.