A Self-Managed Super Fund (SMSF) is a private superannuation fund that you manage yourself, but is regulated by the Australian Taxation Office (ATO). The maximum number of members an SMSF can have is four. All the members are trustees and make decisions about the fund and ensure compliance with the law.

SMSFs have become a popular choice for many Australians looking to take control and got more involved in their superannuation. In fact, SMSFs currently hold over 30 percent of the total superannuation funds. The people that prefer SMSFs the most are those that are highly engaged with their superannuation as well as planning for their retirement.

Top Benefits of SMSFs

1. Investment Options

Investment control along with wider investment options such as commercial and residential property, direct shares, term deposits, collectibles, etc, is one of the key benefits of SMSFs. You will also enjoy access to derivatives along with other complex strategies to hedge your portfolio risk or implement downside protection.

2. Tax Reduction

Besides defined benefit super funds such as government employee funds, the vast majority of superannuation funds typically offer the ability to take a tax-free pension as income once you retire. The added benefit of an SMSF is that it offers far greater flexibility compared to any other superannuation structures especially with regards to contributions, the allocation of earnings to members, and the timing of those contributions. This allows both trustees and their advisers to exploit the unique flexibility that an SMSF offers to reduce the amount of overall tax paid by members of the fund.

3. Asset Protection

Protecting your assets is usually a major consideration for a lot of people, particularly business owners. Superannuation can be a structure for protecting members from bankruptcy and litigation. In case of either event, your superannuation benefits will most likely be beyond the reach of your creditors. If a business venture is failing, the superannuation balance is what the business owner may be left with as their remaining asset. However, since the superannuation is designed for retirement, it cannot be used to support struggling businesses.

4. Transference of Wealth to the Next Generation

A lot of helpful estate planning benefits are built into the superannuation system in Australia. However, an SMSF offers even more benefits, flexibility, and control over a member’s estate plan that ensures that the SMSF funds actually go to the right people, at the proper time, and as tax efficiently as possible. An SMSF will allow you to create a strategy for executing your wishes for the distribution of your wealth with superior tax outcomes.

5. Reducing the Transaction Costs

When it comes to moving to the retirement or pension phase, an SMSF allows you to have a virtually seamless transition from the accumulation phase to the pension phase without necessarily selling your assets thus not attracting capital gains tax along with other transaction costs. You don’t have to sell assets such as shares that may attract taxes and fees in the process. You simply retain your investments and start drawing down on your SMSF balance as an income.

6. Tax Regulation

By timing pensions, structuring, and tilting investment strategies to make use of the concessional tax treatment for the funds such as targeting franking credits, it is possible to reduce tax and for most of the retirement phase client’s refunds can be claimed for any excess credits from ATO. When it comes to dealing with liabilities for the fund, there’s additional flexibility since the fund has just one tax return even though there could be up to 4 members with each having several pension accounts.

7. Cost Savings

For some people, the cost of having an SMSF is far lower compared to a public offer super fund, particularly when the fund balance is high i.e. greater than $200,000. Annual administration of the fund costs between $2,000 and $3,000 on average annually that includes both accounting and audit fees. The average retail super funds charge about 1.5 per cent, which translates to about $3,000 annually on an account balance of $200,000.

Final Thoughts

A Self-Managed Super Fund (SMSF) is an incredibly powerful retirement savings structure that offers numerous benefits as clearly shown here. Self-managed superannuation fund (SMSF) services provided by SMSF Auditor come in handy under such circumstances. If you want to learn more about SMSFs, the benefits they offer, and how to set one up, you should team up with a team of professionals with experience in the strategies guaranteed to suit your needs.

To set up your SMSF, you must be ready to take on the responsibilities of an SMSF trustee and a good Financial Planner such as Quick SMSF Audits can help educate and guide you along the way. Quick SMSF Audits is an SMSF audit firm that offers SMSF audit service to SMSF administrators, SMSF trustees, financial planners, accountants, and tax agents. Contact Quick SMSF Audits today to learn more.