8 Benefits of Setting Up a Self Managed Super Fund

February 14, 2014

There are approximately ONE MILLION Australians who are currently managing their own SMSF. This figure is increasing dramatically each year and there is a reason for it.




A SMSF has a number of specific benefits that Industry/Retail Super funds do not provide. Listed below are some features of a SMSF.


1. Taking Total Control


A SMSF gives you total control of your Super by allowing you to choose where you invest your Super Benefit. Many clients who are unhappy with their Superfund's performance or simply think that they can do a better job investing their Super Benefit themselves are choosing to establish and manage their own SMSF.


2. Lower Fees


SMSF's can be the most cost effective type of Superannuation Fund. This is unique in comparison to other Superannuation Funds whose fees increase as your Super balance grows.


3. Ownership


A recent analysis indicated that sometime in the near future, major Industry and Retail Superfunds will experience payout difficulties due to insufficient liquidity as baby boomers begin to retire and worker contributions are insufficient to meet retiree withdrawals. The reason that this can occur is that you are not the owner of the assets in the Fund. You simply have an entitlement in the Fund assets as a Member. It may be that this risk is exaggerated but it is a risk nonetheless you can do without. A SMSF eliminates this risk entirely because you are the owner of all SMSF assets and you decide when you can access your own super benefit.


4. Consolidate Multiple Member Accounts


A SMSF can have up to 4 Members and each of these Members can contribute to the one SMSF. This means that instead of each Member paying separate fees in their Fund (or in multiple Funds) you can rollover and consolidate 4 persons Super Benefits, which can then be managed under the one SMSF.


5. Accumulation and Pension Fund in One


With Retail and Industry Funds your benefit is typically invested separately in a Pension or Accumulation Account. This means that when you wish to drawdown your Super Benefit as a Pension your Super Benefit will need to be transferred to a separate Pension Account and any additional contributions you make will be added to a completely separate Accumulation Account. Each Account is managed separately with separate investments and a separate fee structure. A SMSF is a Pension and Accumulation Fund in one. You can commence a Pension and continue contributing to the same SMSF. This avoids splitting your Super Benefits into multiple Funds.


6. Taxation Benefits


When you commence a Simple Account Based Pension or Transition to Retirement Pension, the SMSF tax rate falls to NIL on earnings and capital gains. This means that you can generate unlimited income and capital gains and will pay NO tax on them after you commencing pension. This also means that your SMSF is entitled to receive any franking credits on Australian Share Dividends in cash from the ATO. Given that the company has paid 30% tax and your SMSF tax rate in pension mode is Nil, the entire 30% tax paid is refundable to your SMSF. This is not the same in Retail and Industry Superfunds that can decide how to allocate the tax refund or retain it if they choose.


7. Consolidate Investments


It is possible for Members to make contributions of assets into a SMSF instead of cash this is called 'in specie' contributions. Importantly only certain assets listed in the super regulations can be transferred in specie contributions by a Member to a SMSF, such as Shares, Managed Funds and Commercial Property. In specie contribution transfers allow you to consolidate your Family Assets under the one SMSF tax advantaged umbrella.


8. Succession Planning


A SMSF allows you to conveniently and legally pass a Members Super Benefit to their beneficiaries in the event of the Members death. This can keep your SMSF assets under the same SMSF tax advantaged umbrella even after a Members Death. 


The earlier you start your Self Managed Super, the more you save towards

your retirement life.

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