Self Managed Super Fund: Is it right for you?

SMSFs are not for everybody, but here are some key reasons why a SMSF could be right for you:

You want to take control of your retirement benefits

Most people wanting to set up a SMSF want to take a more active interest in the decision making processes around their retirement nest egg. Having a SMSF gives you the control over and responsibility for your superannuation

You want greater choice in the investment decisions

A SMSF is ideal for DIY investors who prefer to make their own investment choices for their retirement rather than leave their superannuation to be invested by others. A SMSF also provides more flexibility in investment choice than any other superannuation vehicle. Trustees can invest in anything from shares (public or private); property (commercial or residential); derivatives; or even collectibles!

You can transfer existing investments into a SMSF

Many people over time have accrued assets outside of superannuation, whether it is from regular savings, an inheritance or other means. A SMSF has the ability to acquire particular assets from members. Holding these assets in the super fund can be significantly more tax advantageous in the long term.

Lower costs to operate

The ATO and ASIC suggest that you need about $200,000 in your SMSF tojustify the costs of running a SMSF and be cost comparable with an industry or retail super fund. If you and your spouse are both members of the fund you need $200,000 between the two of you (not each). However, the reality is that fees aren’t typically the driver for establishing a SMSF. There are instances where SMSFs will be more expensive, but it is an individual choice as to whether the benefits outweigh the costs and therefore whether a SMSF is right for you.

A SMSF can buy a commercial property and lease it back to your business

For many SME business operators, the value of their business is their retirement nest egg. One of the key advantages of a SMSF is that your superannuation monies can be used to buy your business premises and lease them back to thebusiness on an arms-length basis. This provides several benefits including being able to use superannuation money to help fund a business property acquisition and instead of your rent money being dead money it becomes a tax deductible rental payment in your business towards your own retirement.

You have specific estate planning needs

SMSFs can be excellent when it comes to dealing with estate planning matters for blended families, having young children and wanting to pass specific assets to particular beneficiaries. The ability to provide non-lapsing binding death benefit nominations can provide peace of mind about how benefits are to be paid. It may be to provide a non-commutable income stream to a child up to age 25 or a 2nd spouse, or to transfer the business premises to a particular child working in the family business.

You want greater flexibility in how and when to take benefits in retirement

A SMSF allows a member the ability to take control over when they want to start drawing benefits from their fund (subject to the preservation requirements) and in what form they wish to do it. Benefits can be taken as a pension income stream or lump sum.

You want to have greater control over the tax management of your fund’s investments

The ability to take a greater control over the timing of tax matters on your retirement assets is critical as it can potentially make a significant difference to the end value of your retirement benefits. In a retail fund, when you start a pension you change over from an accumulation fund to a pension fund. The fund sells all of your accumulation fund assets triggering a 10-15% capital gains tax bill; and uses the remaining net proceeds to start your pension fund. Within a SMSF, the investments don’t need to be sold and transferred to start a pension. This saves you all that capital gains tax (CGT) because once in pension phase any investment sales going forward are not subject to CGT.

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