A Self-Managed Super Fund (SMSF) can be an appealing option for those who want greater control and flexibility over their retirement savings. Unlike industry or retail superannuation funds, which are managed by third-party institutions, a SMSF allows individuals to manage their superannuation investments directly. Here are some of the key benefits of using a SMSF.

1. Investment Control and Flexibility

One of the main advantages of a SMSF is the control it gives members over investment decisions. SMSF trustees can select a wide range of assets, from shares and bonds to property and managed funds, tailoring their portfolio to fit personal goals and risk tolerance. Additionally, SMSFs allow trustees to invest in unique assets like direct property, physical gold, or even art – assets that traditional super funds typically cannot accommodate. This flexibility is particularly beneficial for those with specific investment knowledge or interests and enables a more customised approach to wealth accumulation.

Unlike industry or retail funds, a SMSF can also use a Limited Recourse Borrowing Arrangement (LRBA) to assist in funding the purchase of a business property from which you can operate your business. This option is attractive to many business owners because the rent they pay then goes towards accumulating funds for their own retirement, on top of the super contributions made each year.

2. Tax Benefits and Strategic Planning

SMSFs offer tax advantages similar to other superannuation funds, including concessional tax rates on investment earnings and capital gains. However, trustees also have more flexibility in managing tax within the fund. For example, they can use strategies like segregated pension assets to reduce taxable income or take advantage of franking credits from Australian shares. Trustees can also control the timing of asset sales, allowing them to manage capital gains tax more effectively. These tax-planning opportunities can enhance wealth accumulation over time and help trustees structure their retirement benefits in a tax-efficient manner.

In addition, members can start retirement phase income streams from their SMSF without having to move or sell assets. This can provide additional tax savings and help members better fund their retirement incomes.

3. Cost Efficiency for Larger Balances

While SMSFs do come with setup and ongoing costs, they become more cost-effective as the fund balance grows. Fixed administration and compliance costs can make SMSFs more attractive for individuals or families with larger superannuation balances, as fees for industry and retail funds are often a percentage of assets. As a result, SMSFs can be a cost-effective option for those with substantial super balances, maximising the efficiency of each dollar invested.

4. Estate Planning and Flexibility

A SMSF offers flexibility in estate planning, allowing trustees to ensure their superannuation assets are managed in accordance with their wishes. Trustees can use binding death benefit nominations or reversionary pensions to dictate how assets will be distributed upon death. This flexibility provides an additional layer of control, making SMSFs attractive for individuals with complex estate planning needs or specific legacy goals.

While an SMSF may not be suitable for everyone, the ability to control investments, tailor tax strategies, manage costs, and structure estate planning makes it an appealing option for many. As with any investment, it’s important for individuals to seek professional advice to understand if a SMSF aligns with their financial goals and personal circumstances.