Did you know that as of March 2024, there were 616,400 Self-Managed Superannuation Funds (SMSFs) in Australia, collectively managed by over 1.1 million members?
Less than 5% of the country’s population hold SMSFs, but a large percentage of the Australian superannuation landscape, with $933 billion in assets.
So why are SMSFs so popular these days?
Let’s see through the top 10 benefits of having a Self-Managed Superannuation Fund.
1) Greater Control Over Investment Choices
One of the primary advantages of an SMSF is the wide range of investment options available to members.
The most important benefit that an SMSF offers is an imposing range of investment options a member has over their superannuation money.
Whereas retail or industry super funds don’t offer such breadth of investment choice, SMSF Trustees can invest into:
- Direct Shares (both domestic and international)
- Real estate property-combined and residential
- Physical gold and other precious metals
- Collectibles and art (strictly with some significant rules)
- Term deposits and high-interest savings accounts
This flexibility allows for an investment plan that is precisely suited to your financial goals and your risk tolerance.
2) Broader Investment Options
You are not limited to the investment products for managed superannuation funds when you have your SMSF. You can invest in residential or commercial property, direct shares, exchange-traded funds, and international assets. This means you are free to diversify and therefore spread the risk and potentially maximise your returns.
3) Tax Advantages
SMSFs offer several tax benefits, including:
- Concessional tax rate of 15% on earnings in the accumulation phase
- Tax-free earnings in retirement phase (for balances up to $1.7 million per member as of 2023-24)
- Ability to implement tax-effective strategies like transition to retirement
4) Cost Savings For Larger Funds
While SMSFs do come with administrative and compliance costs, these can be relatively lower as a percentage of assets once your fund reaches a certain size, generally around $200,000 or more.
The fixed nature of many SMSF fees means that as the value of the fund grows, the cost becomes more cost-effective compared to percentage-based fees charged by traditional super funds.
5) Pooling Resources With Family Members
A SMSF can have up to six members, which means you might pool resources with family members or business associates.
This can bring:
- More purchasing power of investments
- Shared operational costs in the fund
- Opportunities for implementing wealth transfer intergenerational strategy
6) Broader Investment Options
With an SMSF, you are not limited to the investment products offered by managed superannuation funds. You can invest in residential or commercial property, direct shares, exchange-traded funds (ETFs), and international assets. This freedom to diversify can help reduce risk and potentially increase returns over time.
7) Direct Property Investment
Unlike most retail super funds, SMSFs can invest directly in residential and commercial property.
This opens up opportunities to:
- Purchase your business premises through your SMSF
- Invest in residential property using a limited recourse borrowing arrangement
- Potentially reduce capital gains tax on property investments
8) Flexibility In Pension Payments
An SMSF offers you flexibility in stepping into retirement and how to exercise your pension payments. You have the option of tailoring the pension strategy to your needs, such as in respect of an amount of pension draw-down or even structuring your pensions to make it more tax-effective. Retail and industry funds offer little pension options, though.
9) Customised Insurance Coverage
With an SMSF, you can customise your insurance covering to suit your wants. These include:
- Life insurance
- Total and permanent disability insurance
- Income protection insurance
You may also be more likely to have more comprehensive coverage or even term policy options available to you as compared with a retail super funds option.
10) Transparency And Control Over Costs
Company and self-employed superannuation provides full visibility on all costs associated with the fund. Pricing structure has no extra charges; you can decide where to incur costs in such areas as administration, auditing or advice on investment. What this means is that you are able to control your expenditures, which can even translate to longer term cost cutting.
Take Control Of Your Retirement With KPG Taxation
Ready to reap the rewards of an SMSF? KPG Taxation has the expertise to help you set up and manage your SMSF most efficiently, right from devising a personalised investment strategy to handling all the compliance and accounting requirements.
Come and allow us to lead you on the journey of decision-making that will help you build a secure financial future for yourself. Call KPG Taxation today to get underway in the process of establishing your SMSF.
