Benefits on an SMSF
Traditionally, management of superannuation accounts has been delegated to large institutional funds of an Industry, Retail, Government or Corporate nature. For good reasons however, this mindset has been changing, with the era of the ‘DIY’ investor, or for some, the ‘assisted’ investor, both of whom are seeking greater control over their personal wealth. There could be any number of reasons for establishing an SMSF, but to keep it simple we have summarised the key benefits into three categories below.
With an SMSF you can have a greater selection of investments including shares, property, term deposits and precious metal to name a few. You choose if and when to buy and sell investments and because of this you can react far more swiftly to changes in investment markets, with direct access to the cash and trading accounts of the fund. You have the ability to determine your own unique investment strategy in line with your long-term wealth accumulation objectives, including the ability to borrow in order to finance some investments.
The structure of an SMSF allows for more pro-active management of your superannuation tax affairs. Decisions with tax implications can be thought out and implemented with the individual member (you) in mind. For example, when selling shares in an SMSF, specific parcels can be sold in order to minimise or maximise capital gains depending on your objectives. Direct entitlement to dividend franking credits can also boost the net income of the SMSF, particularly when a member is paying a pension. An SMSF can also cater for both pension and accumulation benefits for up to 4 members.
There are some aspects of the management of an SMSF that need to be delegated, such as accountancy and audit. You may also require the assistance of an actuary, lawyer or financial planner. Depending on who you choose to partner with and how much of the work you choose to delegate, operating costs for an SMSF can still be far cheaper than the traditional superannuation vehicle. Ultimately though, the compliance of the SMSF is your responsibility.
Typically the necessary services are provided on a fixed fee basis rather than as a percentage of the value of your superannuation benefits, so not only are the costs more predictable, but the larger the account balance, the larger the cost savings.
With the advancement of modern technology, you can now have one of your greatest assets not only in your control, but at your fingertips. Rather than waiting for a benefit statement to be mailed to you, in most instances this information (and more) is available to you online.
Much greater influence can be held over the payment of benefits either as a pension or to beneficiaries on the death of a member, with some flexibility around when and how the benefits are paid. Family super benefits can be pooled together (up to 4 members per fund), making an SMSF a very pr actical vehicle to fit in with your family’s overall investment strategy and succession plan.
Most importantly, with a targeted and educated approach to investing, potentially higher returns can be achieved to support your lifestyle in retirement! Whilst there are a number of benefits to having an SMSF, you should also consider the disadvantages. Being an SMSF Trustee comes responsibility. If you are time poor or do not have knowledge around the rules and regulations, an SMSF may not be appropriate for you. We suggest you seek financial advice prior to establishing.