Over the years we have seen Self Managed Superfunds (SMSFs) have grown in popularity. The number of SMSFs has increased significantly and statistics from the Australian Taxation Office show there are 593,000 SMSFs holding around $733 billion in assets as of June 2020. If you’re wondering why choose a Self Managed Super Fund, then read on – this article looks at what an SMSF is, what type of investment you can make and why they are so popular.
What is a self-managed super fund?
- A self-managed super fund is, as the name suggests, a DIY superannuation fund.
The fund comprises up to 6 members - Each member is a trustee of the fund or a director of the corporate trustee
- All members must be trustees or the director, and all trustees must be members
- An SMSF must have its own bank account
- An SMSF must have its own trust deed – this outlines who can be a member of the fund, what investments can be made and who can receive a death benefit
- Your SMSF must undergo an annual audit
- You must lodge a tax return with the Australian Taxation Office
Benefits of a Self-Managed Superannuation Fund
1. You can choose how you invest
As long as your investment meets regulations, your SMSF can invest in anything you like, including direct investments in property. You have a level of freedom that is absent in industry-provided super funds.
2. You have more flexibility
Choosing an SMSF means you have more control over how your savings are invested. You can adjust according to market fluctuations and take advantage of new opportunities.
3. You have tax advantages
Members of an SMSF enjoy a concessional tax rate on final earnings and contributions of 15%. Benefits received after the age of 60 are tax-free. The flexibility of an SMSF means that the structure of a group can be considered when deciding tax strategies, which maximises your benefit.
4. Pooling
Being part of an SMSF means you can join forces with up to 5 other members. This can give you greater investment power and allow you to take up opportunities that may be out of reach as a solo investor.
5. Estate management
The ability to manage death benefits is another feature of the SMSF. This type of super does not require constant updates – death benefits are binding and can be paid to the recipient as a lump sum or as a pension. Non-cash assets can also be distributed according to member wishes.
6. Protection from creditors
In accordance with the Bankruptcy Act and SMSF is not regarded as property. This means the assets in the fund are protected from claims by creditors or bankruptcy.
Things to consider about a self-managed superfund
- There are many benefits to choosing an SMSF, but as with any financial decision, it’s important to seek guidance from a financial adviser to fully understand the costs and legal obligations.
- If assets are low, then the costs of running the fund can outweigh the assets
- Penalties for non-compliance with the rules are significant and you will likely need professional support to ensure compliance
- As a member of an SMSF you forfeit your right to compensation in the case of loss because of fraud
- An SMSF can cause an increase in costs for life or disability insurance because you lose the default cover offered by larger super funds.
Find out more
At Ironbark Wealth Advisers you can find out whether choosing a self-managed super fund is right for you. Just get in touch online or give us a call on 0268844680.
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